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.
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.
– 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).
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.
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 firstname.lastname@example.org 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!!
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.
* 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.
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
This 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.
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.
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.
On Tuesday night I had the honour of joining Aakash at Deakin University’s Vice-Chancellors Professional Excellency Program Inaugural Dinner.
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.
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!
Recently I was fortunate enough to go to the Association of Financial Advisers (AFA) 2016 conference in Canberra. The 3 day event was kicked off by JBS’s own Jenny Brown as conference chair and current AFA Vice President. JB launched the theme of “Adaptive Change, Taking Advice Beyond The Horizon”. The theme was very appropriate as our profession continues to go through change, not only with legislation, but also with other factors such as technology and an ever changing political and economic environment.
For me, it was a great chance to be able to come together with other professional advisers, practice owners and thought leaders to discuss ways to take advantage of these changes. The highlight for me, and no doubt the majority of the other delegates, was to hear from the Honourable John Howard. It was fantastic how he spoke about where he sees Australia, lessons he has learnt from his time in politics, leadership and what we, as a nation, need in the current political environment. He talked about the current focus on the Australian banks as “strange” given the number of inquiries into them since the GFC, and the fact that they held Australia in such a strong position during this time. He spoke about leadership and how if you get into a leadership position you are going to make mistakes, the important thing is to get the “big things” right. But the final, and in my view, most important point was that as a leader, not everyone is going to agree with your decisions and thoughts but if you are passionate and decisive, the majority of people will respect you and your decisions.
Day 2 kicked off with Dr Ric Charlesworth, one of Australia’s most highly regarded sporting minds. He spoke about one of the biggest lessons business people can learn from elite sports people, is the emphasis on training and learning. He spoke about the amount of time that athletes spend training and preparing for their sports, rather than competing and how we, as a professionals, need to ensure that we are spending the time required to train to improve.
As previously mentioned, one of the great features of the AFA conference is the networking and peer learning. The “Meet the Professionals and Innovators” session was an intimate session where advisors are allocated to a table with one of 40 leaders in our industry. At JBS, our honour board and awards list shows that we are clearly cutting edge and industry leaders in our own rights, but that doesn’t mean that you can’t continue to learn from others. I used this as a great opportunity to pick the brain of the 2015 AFA Adviser of the year about his approach to business. There is no doubt much of what we do at JBS is cutting edge, but I was able to identify some small ideas that we can use to enable us to provide a more valuable service for our clients.
Day 2 finished with one of the most inspirational speakers I have ever heard, Brian Freeman, Founder of Walking Wounded. Brian’s story was amazing and I have recounted it to many people since the conference. Walking Wounded exists to reduce the incidence of suicide in our Veteran Australian Soldiers and service men and women returning from conflicts such as East Timor, Iraq and Afghanistan. Brian started the foundation in 2014 for the reason that since 1999, 239 soldiers have taken their own lives once they have returned home, not because 46 soldiers have been killed in combat. To raise awareness of the issue, Brian took it upon himself to carry the Roll of Honour containing the 41 Australian soldiers killed in Afghanistan, signed by Governor-General Peter Cosgrove and sealed in a metal canister on an epic journey. Over 7 months, beginning on Remembrance Day in 2014, Brian commenced with Mount Everest in April, prior to running 4,805km from the Tip of Cape York to the bottom of Tasmania, including kayaking unassisted across Bass Strait, all in 85 days. He then traversed the Kokoda Trail prior to ascending Mount Kilimanjaro, all to raise awareness. Fittingly at the end of this amazing story, Brian was asked to join the MC for the day, and the audience, to complete 22 push ups as part of another awareness challenge, #22pups22days4ourmiltary, a campaign you may have seen on social media.
On day 3 we heard more from our industry leaders, once again with Jenny on the stage leading the way. We heard presentations about the benefits of taking time to work on the business, as well as in the business, a concept called the dance floor and balcony. The theory is based on a nightclub scenario whereby everyone gets the excitement of the day to day work of the dance floor, but often it is good to take a break from the day to day business to spend some time on the nightclub balcony and look at things from a different point of view. This is a theory that we spoke about at length at our JBS retreat, and this was a good opportunity for me to reflect and confirm that I spend enough time looking at how we do things rather than just getting caught up in the businesses of the ‘dancefloor’.
The afternoon included another great session on “Cool Sexy Tech for your Financial Advice Business”. This session prompted us to think about how we see ourselves from a technological point of view in 5 year’s time. The presenters had recently completed a tour of the Silicon Valley where they talked about the 800 plus start-up companies that are looking to shake up the financial services industry across the world. We ran through a futuristic scenario of how our clients will potentially be relating with their finances in the future and how we need to be able to adapt our businesses and services accordingly. I was excited to hear of the technology that is potentially on the horizon, and will enable me to have more relevant, meaningful and time critical conversations with our clients about their goals, dreams and their ability to achieve them.
Dr Adam Fraser concluded the conference, presenting on ‘Peak Performance without the Collateral Damage’. He spoke about the importance of the “third space”. The third space is the transition gap between each task we do, not just at work but also at home. He talked about this as the new competitive advantage in business and life. It is the time that you take to get over what you have just been through and show up to the next meeting or challenge with the right frame of mind, to allow you to get the most out of what is coming next. He talked about how this separates elite athletes from the rest of the pack. For example in tennis, the 3rd space is the time between points, and the best players reflect quickly on the past point, put in behind them and move onto the next point. He spoke about it not being what the best players do during the point it is what they do between the points that makes them elite. For me, I found this really helpful as my third space is often the drive home from work. Up until recently, I had used the drive home to listen to work related podcasts or make telephone calls, but often this meant that I took my work home with me and wasn’t able to shut off to spend time with my children before bed. About a month ago, I decided to listen to podcasts that make me laugh or call mates to catch up. Without realising it, I was using it as my third space and it was meaning that I was coming home in a better frame of mind. This session really re-enforced the importance of this time for “me” and how it makes me a better father as a result. This is something I really want to ensure becomes ingrained in my daily routine.
I often get the feeling that people criticize conferences as junkets or don’t feel that they have time to attend however, for me, the right conference is a fantastic time to step out of the day to day routine, look at things with a fresh set of eyes and take the required “balcony” time to ensure that we, as a business, and me, as an individual, are doing things as best as we can to not only provide a great service to our existing clients, but also provide an offer that is appealing to potential new clients.
What if you only invested at market peaks?
Have you ever noticed that as soon as you buy an investment it tends to drop in value? Whilst this doesn’t really always happen, it just tends to be the investments we remember, what if it did happen? Even worse, what if it dropped by epic proportions?
Meet Tim who is the worst market timer that has ever existed. What follows is Tim’s tale of terrible timing of his stock purchases.
Tim, fresh out of school, begins his career in 1970 at age 18. He understands the importance of investing and saving for the future and therefore decides to start allocating $2,000 per year into a savings account. It’s now the end of 1972 and he has saved up $6,000. Into the stock market it goes. Unfortunately for Tim, after watching the stock market go up and up over the last two years, over the next two years it drops 48%. Tim loses a bit of confidence in the market and while he doesn’t sell, he continues to save up his money in a bank account waiting for things to improve.
15 years later and Tim decides that now is the right time to put more money into the market. It has been going up for years and he sees no reason why it won’t continue. He invests his entire $46,000 into the market. After a small decrease the market then drops suddenly on the 19th of October dropping a whopping 27% in one day. Tim’s had enough, no more putting money into the market. He leaves what is already in there as what’s the point in selling now and goes back to saving in his bank account.
After ignoring the market for 12 more years Tim can’t avoid people talking about the internet. Everyone is making money from the internet. Unfortunately Tim knows very little about the internet but the media informs him that there are plenty of companies on the stock market that do. He takes his $68,000 that he has in the bank and jumps in but this time decides to not even look at the market for the next two years. 2 years later he checks his investment and it have once again decreased by 50%.
It’s 2007 and Tim is now 55. He’s looking to retire in 2013 and decides he’s going to have one last dig at this share market thing. He’s managed to save up $64,000 and into the market it goes. Little does Tim know that once again he’s picked a terrible time to invest, the GFC is about to commence with losses of over 50%.
That’s it, no more investing for Tim…..ever! Once again he leaves the funds in the market but saves up another $40,000 in cash before he retires. So what did he end up with at retirement?
Over his working life Tim has managed to invest $184,000 saving an additional $40,000 over the last few years in cash giving a total investment amount of $224,000. Sure he picked the absolute worst times to invest including the bear market in the early 70’s, the infamous one day crash in 87, the technology bust in 2000 and the GFC in 2007. But he never went back on his investment decisions; he never sold any investments.
Tim ended up with a total retirement balance of $1.1 million. While Tim was a terrible market timer, he was a good investor. He saved a regular amount on a regular basis no matter what. He didn’t panic when the market went down and sold his investment. Instead he maintained his investments until he needed the money. Finally, he invested for the long term and even though he pretty much picked the top of the market each time to put the money in, over time the market continued to go up in value, even if he had to wait a little while after the big falls for it to recover, it always did recover and then go on to meet a new high.
We are not recommending anyone follow Tim’s strategy. He didn’t include diversification in his investment product options and if he would have implemented a dollar cost averaging strategy where he contributed his savings amount each year no matter what, he would have ended up with over twice as much.
This is based on a study in the US, given US market investments however Australian markets felt the same crashes and still illustrates the importance of standing strong with your investment decisions. Time in the market is more important than timing the market.
So what can we take out of Tim’s fictional experience?
1. Losses happen and are part of the deal when investing in the share market. It’s how you react to those losses that will determine your investment performance over time.
2. Invest for the long term and let compound interest work for you.
3. The biggest factors when determining growing your wealth are time, and savings amount. The effect of the actual returns the investments generate on your portfolio pale in comparison to how much money you contribute and how long you invest. Get these two things right, and the rest will follow.
If you are thinking about investing or want to learn more about how you can start your investment portfolio, contact one of the advisers at JBS.