Tag Archives: JBS Financial Strategists

Saving on a Tight Budget

With the holidays fast approaching, it’s time to start to consider how you will fund your holidays / shopping / all-round fun. After all, the summer months are a great time and you definitely want to show your loved ones how much you care, but breaking the bank isn’t an option.

 

Saving on a tight budget can be quite difficult. To ensure you reach your holiday saving goals it is important to start saving early on. Another key to success is to set a concrete and achievable goal for yourself, and decide how exactly you will achieve that goal.

 

Perhaps your goal is to purchase gifts for all of your children, or fund a nice holiday away. Whatever it is, firstly determine the total cost. Break the total down by how many weeks you have left to save, and figure out where you can trim your budget to set that amount aside each week.

 

Some of the best areas to cut your budget include:

 

No more buying coffee or eating out — You’ll be surprised how much you can save by doing this.

 

Foxtel – Replace TV-watching with reading, cooking, games with your family, or other fun-yet-free activities. Take advantage of the warmer weather outside (when it decides to arrive).

 

High Interest Bank Account – Put any savings / loose change etc into a high interest bank account and save regularly. Having a separate bank account makes it more difficult to touch until you really need it (like for holidays).

 

And just as important, find ways to motivate yourself to keep saving.

 

It’s easy to become discouraged when your savings aren’t growing as fast as you would like, so it’s important to find ways to motivate yourself to keep saving.

 

I personally like to think about what it is exactly I am saving for and what I am achieving every time I deposit some money into the savings account. For example, if we are saving for a trip to Thailand and our travel budget is $100 a day, then every time I save $100 I know that’s one day of our holiday I have just paid for. Simple, but very effective.

 

Saving money and being thrifty isn’t fun but remember the end product will be! When you are lazing on the beach at your desired location, visiting Disneyland, or camping at your favourite spot, there is no doubt that you will be glad you saved every cent!

 

Make a commitment now to plan ahead, and it is very likely those savings will lead to a fun-filled time over summer.


Ins & Outs of Aged Care

It’s hard to be passionate about Aged Care and in fact a lot of the time it’s very overwhelming and daunting, and can be a very emotional time for the family when they have to move a loved one into care.

 

Often one of the biggest questions is how do we fund it!? Especially when it comes to paying the Refundable Accommodation Deposit (RAD), with most people then stressing over what to do with the family home? Add onto that the fact it can be something that could be time critical, and selling a home isn’t something that can be done overnight.

 

The good thing is that this isn’t the only option you have. Although most Aged Care providers will probably try to make you pay a RAD, you actually don’t have to straight away. In actual fact you have 28 days from the date you enter Aged Care to make a decision on whether or not you have to pay a full or partial RAD, or if you want, you could even pay a Daily Accommodation Payment (DAP) or a combination of both.

 

If you elect to pay a DAP at a later time you can then decide to pay a RAD, but it doesn’t happen the other way around, so if you select RAD as your payment, unfortunately you’re stuck on this option. If selling the family home is the only viable financial option, by selecting a DAP you have the flexibility to not rush to sell the home and can instead pay the DAP up until the home is sold and when you can afford to pay the RAD.

 

However, the DAP isn’t necessarily cheap either, it’s normally worked out based on what RAD you are required to pay to secure a room. For instance, if the RAD is $450,000 and the current Maximum Permissible Interest Rate (MPIR) is 5.73%, then your DAP is $70.64 per day ($450,000 x 5.73%) / 365. If you pay a part RAD then you’re also required to pay a part DAP, and an option you have is to have the DAP deducted from the RAD to help ease cash flow.

 

Now you can see why it’s hard to be passionate about Aged Care, you have RAD’s, DAP’s, MPIR’s, and a whole lot of other acronyms that are hard to get excited about, and we haven’t even gone into all the fees yet, yikes!

 

Here at JBS we are passionate about helping our clients through every stage of their life including assisting their loved ones make decisions around Aged Care. When the time comes, rather than stressing about what to do, pick up the phone and talk to JBS. We can help assess what the best option is for you or your loved one and help you put in place a strategy to help fund Aged Care, and where possible help to reduce the impact of the fees.

 

– Peter Folk –



Cash Flow Management

There’s something about starting a new year that brings with it a tonne of motivation. That fresh start where you can re-set, clean-up, and where energy levels are high and excitement at its peak. Where our passion for giving those dreams of ours a really good shot is reignited and our visions of living bigger and better are at the forefront of our thinking.

 

However, we get to March and the motivation starts to taper off and by April most goals have been abandoned or forgotten about. Research shows, in the end only about 8% of people stick with their good intentions.

 

So what do this 8% do differently? Are they just more willing to invest wholeheartedly to work towards their goals? Maybe, but experts say it has more to do with how they set themselves up for success. Specifically, they use January to re-set themselves and clean up any messes from the previous year, then invest the time and effort into effective goal planning.

 

So with the new year having now kicked off, here’s a list of the best results-driven tactics to ensure you are part of that 8% and make 2017 your best year yet:
Get Super Clear

Vague or generalised goals such as ‘save more’ won’t serve you. They need to be specific and well defined so that they can be measured.

 

–  What?

–  When?

–  And How?

 

Specific goals such as ‘pay off credit cards by March’ are easier to measure. By then mapping out the action steps required it is then easier to achieve the goal than not.

 

But there’s also the why? Connecting emotion with your goals will help you remember why they were important in the first place and will reignite your passion for reaching them when things get difficult.

 

Write it Down

Study after study has shown that those who write down their goals accomplish significantly more than those who don’t. Why? Putting pen to paper forces you to clarify what you want, it motivates you to take action and it makes it easier for you to see your progress and celebrate your successes.

 

Get Support & Accountability

We’ve all heard the importance of being around the right people, especially when chasing our goals.  When you’re in pursuit of a dream, there are many elements that can resist your path and block your forward motion.  Surrounding yourself with people that are genuinely cheering for you will help you disengage from this resistance and keep you moving forward.

 

That’s where JBS fits in. We believe (and know!) that the biggest influence of you achieving your financial and lifestyle goals is firstly to have clarity on what your goals are, then aligning your cash flow to help you achieve those goals. Fortunately for you we have a program designed to help you achieve this.

 

The JBS Cash Coach program is tailored to you, your needs, your goals, and the actions you need to take to achieve those goals.  We take the time to understand you, then design solutions to help you achieve your goals. We help you create a spending and savings plan that is aligned to your goals, and keep you accountable and motivated on a monthly basis to maximise the probability of achieving your goals so you can have the lifestyle you are entitled too in 2017 and into the future.

 

The early part of 2017 is the perfect time de-clutter your life of the excess build up from last year, clean up, clear your head, set motivating goals, and get moving towards those goals.

 

The JBS Cash Coach program will help you get the most out of 2017 but only if you take action. Make time and join the best support network around (aka JBS Cash Coach).


Age Pension Changes

Australians are becoming healthier and living longer than ever before, and the Australian population is ageing.  Each year an increasing number of people retire and many rely either in full or partly on the Age Pension to help fund their retirement.  The Australian Government has made some changes to the Assets Test under the Age Pension which came into effect from 1st of January 2017. The aim of the changes is to make the system more sustainable for the future.

 

Essentially if you’re assessed under the Assets test, that is you receive a lower Age Pension under the Assets test than under the Incomes test, then you may be affected by these changes. These changes are summarised below:

The tapering rates for the Age Pension are also changing, under the current rules, your payment is reduced by $1.50 per fortnight for every $1,000 of assets over the lower asset test threshold. Under the new rules, the reduction is now $3 per fortnight for every $1,000 in assets over the lower threshold.

 

With these changes, those with lower assets will benefit from a higher lower assets test threshold, but those with higher assets may receive a reduced amount of Age Pension or none at all.

 

If you are to lose your Age Pension from the 1st of January 2017 you will be automatically eligible for a Low Income Health Care Card, and most likely eligible for a Commonwealth Seniors Health Care Card.

 

Given the changes to the Age Pension Assets test, now may be a good time to reset your current strategies and look at ways that may help maximise your Age Pension entitlements. There are a few little things you can do to help maximise your Age Pension:
–  Re-value assets – Especially in the case of Home Contents and Vehicles, for Centrelink purposes you only need to record the “Fire Sale” value not the insured value.

–  Gifting of assets – You can gift assets up to an allowable limit of $10,000 and $30,000 over a rolling 5 year period.

–  Superannuation – Money held in the superannuation (accumulation phase) for someone under age 65 is exempt from the Age Pension Assets test. This can be particularly helpful when an individual in a couple is below Age Pension age.

 

Although the above tips may help to maximise your Age Pension there are traps to each one which need to be considered. JBS are pre-retirement and retirement specialists and may be able to help you maximise your Age Pension.  If you or a friend need help with the changes to the Age Pension feel free to give JBS a call.

 


That’s a Wrap

Wow can you believe that 2016 is nearly over? What an exciting year for JBS – transferring to our own licence to allow greater control and flexibility within the business and also gaining some fantasic new additions to the JBS clan.

 

JBS Financial Strategists will be closing at 4pm on Thursday, 22 December and reopening on Wednesday, 4th January, 2017. During the holiday closure the business will be supported via email on strategies@jbsfinancial.com.au or Jen’s mobile phone on 0418 990 988 for urgent issues.

 

We would like to thank you for your ongoing support and commitment throughout 2016.

 

From all the team at JBS, we would like to wish you, your family and your friends a wonderful holiday break, a safe & prosperous New Year and we look forward to seeing you in 2017.

 

We hope you get a laugh from our video – we had plenty making it!!

jbs-xmas


Pension Changes Means Reduced Tax Savings

Rule changes occur regularly with the Government in power tweaking legislation to make it fairer for all and ensure that the Government isn’t relied upon to fund everyone’s retirement through the Age Pension. This balancing act means that the strategy you implemented last year may no longer be beneficial for you or worse, not allowed. One change that is due to take effect from 1 July 2017 is the change of the tax treatment for Transition to Retirement pensions.

 

Transition to Retirement (TTR) pensions were introduced back in 2005 to allow those people that were easing into retirement by dropping their working hours to supplement their wages with an income from their super balance. However, while this was very useful for those in retirement transition, it also proved to be a powerful financial planning strategy, recycling funds through the super system to achieve the same take home pay however a reduced tax liability, meaning more funds are held in your superannuation account building for your eventual retirement. The Government and ATO knew of this strategy however as it was within the bounds of the laws in place, it has been accepted for use.

 

It does seem, however, that the Government now understands the additional tax that could be found and has implemented changes to take effect 1 July 2017 to make a TTR pension lose its tax-free status. This means that a TTR pension will have the same tax treatment as if it was in a superannuation account (15% tax rate). For those in the retirement transition space, it probably won’t change much as they need to subsidise their income and if the money wasn’t held in pension, it would be subject to the 15% super tax rate anyway. For those who have employed a TTR strategy to reduce tax, the tax savings will be reduced.

 

The strategy may still be beneficial, especially if you are able to achieve a significant salary sacrifice contribution from a higher income, however the tax savings will drop as the pension fund will now be subject to the 15% tax rate also.

 

Example:

pension-table

 

* For the purposes of this simplistic calculation, ‘Tax on Pension Investment’ is the 15% tax on investment income earned (4%) while money is held in a TTR pension. If assets were sold during the year, CGT would also be payable, making it again less tax effective. As this individual is under age 60, pension income is taxable.

 

Some clients situations allow them to maintain a tax-free pension or become eligible to establish one in the future. For this reason it is critical that all TTR strategies are reviewed prior to 30th of June 2017 as the new rules may not be applicable to you.

 

While you need to be making an appointment with your Financial Adviser to discuss the changes and determine if there’s still a benefit for you to continue with your TTR, more than anything this should highlight the need to have an ongoing relationship with a financial planner. Make sure you take up every opportunity to have a regular review of your financial plan, your objectives, determine if you are on track to reaching your goals and determine if the strategies in place are still appropriate. Your situation may not have changed but legislation may have.


Mistakes People Make When Buying Insurance

Purchasing insurance is the most effective method to protect our families and ourselves, financially against unforeseen circumstances.  Often however, people make simple mistakes whilst purchasing personal insurance cover.  Here are some of the mistakes we find people make.

 

Purchasing insurance online or over the phone without professional advice

 

insurance-2This point refers to all those commercials you see on TV about how you can buy insurance cover over the phone in 5 minutes without any medical and lifestyle questionnaires. When you buy insurance over the phone or online, the assessment process will seem to be very simple and fast.  This type of insurance is what we refer to as direct insurance.  Although simple to implement, direct insurance comes with more risks as direct insurance cover can mean assessment is carried out at the time of claim.

 

For example you might call up an insurer that you’ve seen on TV and get your insurance cover in place. 3 years later you suffer from a medical condition and need to claim. As the assessment wasn’t carried out during the application stage, it’ll be carried out during the claim stage. During assessment process, the insurer will assess you medically and financially for both the claim and from when you started the policy.  If the insurer discovers that you’ve had medical conditions prior to taking out the insurance policy, they could potentially void your claim altogether, meaning they cancel the policy as if you never held it.  This ultimately means you have been paying 3 years’ worth of premiums for an insurance policy which provided you with no cover at all.

 

Going through professionals such as a financial adviser, should mean you’re assessed at the time of application.  Although the process may take a little longer, it means you and your family have some certainty when you are accepted at application time, rather than be declined payment because of something you didn’t disclose during application stage.

 

Only considering price rather than value of the product(s) purchased

 

Price can often play an important part in your decision to buy personal insurance, but it should not be the only factor to consider. Find out about things like:

 

–  Additional benefits and definitions of the policy
–  What types of benefits are included and excluded
–  Claims payment procedures
–  What exclusions or limits exist on the cover
–  Ownership options

 

Price should not be the only consideration when purchasing insurance. That good old saying of ‘You get what you pay for’ applies here. Cheap generally means a lesser policy.

 

Implementing the wrong levels of cover required

 

We often find many people implement insufficient insurance covers in order to save money on premiums or they simply don’t know what to include when assessing their need for cover.  Whatever the case underinsurance could leave you and your family in financial strife.

 

These are just some of the questions you need ask yourself whilst implementing death cover.

 

If you were to die prematurely which option would you prefer for your partner?

–  Repay the home loan and never have to work again
–  Repay the home loan and not have to work for 5 years
–  They lose the house and have to return to work immediately
–  They can fend for themselves

 

Additionally would you also want the following expenses covered?

–  Funds for funeral expenses, medical expenses and legal expenses
–  Funds for the children’s education
–  Funds as an inheritance for kids and your partner
–  Purchasing insurance with premiums that increase as you get older

 

As you get older the chances of you suffering from a medical condition increases, therefore insurers tend to charge higher premiums for older Australians. This causes many people to cancel their cover simply because the premiums (costs) keep getting higher each year with their age.

 

You also have the option of purchasing your insurance with level premiums. This means the premium can be averaged over the lifetime of the policy and will not increase each year with your age (Cover and premiums can increase by CPI).

 

Another option is to reduce your sum insured which will reduce your premiums.  As you get older, your expenses and debts such as the mortgage tend to reduce.  Therefore you can reduce your level of insurance cover depending on your situation, which in turn will reduce the premiums payable.

 

Not reviewing your situation and your cover as life events take place

 

Certain events that occur in our lives can make a massive impact on our financial needs. Events can range from the birth of a baby to repaying the mortgage, receiving a promotion or re-entering the work force.

 

Every time there are certain changes to your life, you need to review your insurance cover. Picking up that phone and having a chat to your adviser, could mean you and your family receive the much needed additional cover. Or it could even mean savings in premiums as the existing cover you have may be too high and needs to be reduced.  Whatever the case it’s important to review your insurance needs every time a certain life event occurs.

 

If you want to know more or thinking about putting in place personal insurance cover, please contact JBS Financial Strategists.

 


What do young investors want?

For a while now, I have heard a few finance graduate friends in their early 20s say “I want to start investing, but don’t know how and where to start’’. When a finance student raises such queries, it’s comparable to a medical student entering an operation theatre and asking which instruments to use.

 

When us youngins hear about investing in stock markets, a mental image of men in dapper suits throwing out technical jargon (DRPs, Options, Hybrids, etc.) that many don’t understand comes to mind. All we know is they are talking money! So what do young investors really want?

 

Sharemarket Perception and what the young investors want

As per the ASX 2014 Share Ownership Study, in Australia 15% of the total youth aged 18-24 and just 25% aged 25-34 own sharemarket listed investments. One of the biggest reasons identified for not investing is that they don’t know much about the sharemarket. Another misconception is that a huge amount of money is required to enter the sharemarket. Post GFC, the inclination towards investing in managed funds has also reduced as the older investors suffered losses in those types of investments. So for the young investors it is a dilemma as to where to start and how to diversify.

 

Youth needsyoung-investors

Broadly, after graduation, there are 3 types of youth;

–  those who know exactly what they want to do in life

–  those who haven’t decided yet

–  those who ‘kind of’ know what they want to pursue

 

All of them have one thing in common, everyone wants to be financially stable or at least have regular cash flow to live the dream, be it travelling, paying off student loans, savings for a home, etc.

 

Today’s Gen Y, we want to have it all. Yes it may be wrong to stereotype all Gen Ys as one, but for argument’s sake let’s consider this assumption. We want fast results, we are go-getters and not afraid to take risks. However when it comes to investing and financial independence, our risk appetite stumbles a bit and I feel it should. These are not easy decisions to make but with the correct attitude, information and expert’s help, the risk level can be reduced.

 

So ideally, we want to save for the future, while enjoying the present and we want all of this, fast! All these wants contradict each other at some level. To save for the future, you have to sacrifice a part of your present income which means sacrificing a part of your present living unless you’re born with a silver spoon or have a billion dollar start-up idea!

 

Need for mixing it up

Historically, Australians love dividend paying shares and there has been a tradition of dividend payouts by the big companies. This is because of the tag of being a safer company and investing in them provides an income. However this does not mean you adopt a defensive strategy by investing in dividend paying stocks. The past few weeks of the reporting season saw 65% of companies increase their dividend by a small amount whereas 14% of the companies cut dividends by a large amount (The SMH, August 29, 2016).

 

Even if a person starts investing at the age of 25, there remains another 30-35 years of working life to save, invest and spend as well. A rough calculation of risk taking in investing is the ‘100 – Age’ formula. Say if you are 25, 75% of your investments should be stocks. Conversely, if you are aged 45, then you should have 55% in the share market. This is because when you are young and you lose money on your investments, you have less responsibilities to worry about and more time to build your wealth back up.

 

I recently read a book “Financial Passages” – by Mercantile Mutual Funds Management which truly said that ‘any money you set aside now has plenty of time to work hard for you’. The earlier you learn by taking risks, the better you will get at investing with time.

 

If you are thinking about investing however not sure where to start, contact the team at JBS today to discuss your personal circumstances.


Congratulations Aakash

On Tuesday night I had the honour of joining Aakash at Deakin University’s Vice-Chancellors Professional Excellency Program Inaugural Dinner.

aakash-award-2

The Vice-Chancellor’s Academic and International Excellence Scholarships are awarded to Australian and International students whose exceptional academic and extra-curricular achievements truly sets them apart.

 

aakash-awardAakash was one of three inaugural scholars honoured on the night and it was a privilege for me to represent JBS as one of the inaugural employers involved in the program.

 

To be part of the Vice-Chancellor’s Professional Excellence Program, the scholars are required to participate in academic mentoring, career and personal development coaching, as well as challenges focused on providing them with professional and personal awareness and growth.  Not to mention that they have to achieve an extremely high level of academic performance.

 

Well done Aakash on your achievement, you are a great asset to the JBS team!