Planning for the future is essential to financial planning. Having money now is great but it’s having money 5, 10, 15 years from now that really counts when it comes to financial planning.

So a plan is developed using appropriate strategies providing you with money in the future enabling you to achieve your goals. However, what if things go wrong? What if something happens where you are not able to achieve your future goals? No, I’m not talking about investment returns.

When planning and saving for the future, your income, expense and savings levels are critical. They are the main things that will determine how much money you will have in the future. So what happens if your income all of sudden stops? Or if you have a large one off expenses that depletes your savings and may even put you into debt?

Did you know:

Potential injuries, illnesses and even death can significantly hinder our ability to reach our goals and may even make them impossible. Our human thinking of “It will never happen to me” just doesn’t cut it when you look at the above stats. Accidents happen and cancer does not discriminate but there is something that we can do to minimise the impact. Life Insurance.

There are 4 kinds of Life Insurance each providing cover under different circumstances:

Death Cover – As the name suggests, this provides a lump sum amount to your beneficiaries when you die.

Total & Permanent Disability (TPD) Insurance – As the statistics show, we don’t always die but we can have serious injuries that stop us from working. TPD cover provides a lump sum payment if we are permanently unable to work due to illness or injury such as what may happen if for example we are in a serious car accident.

Income Protection – This provides you with a regular income if you are unable to work due to illness or injury.

Trauma insurance – Also known as critical illness insurance provides you with a lump sum if you suffer a critical illness for example cancer or a heart attack. The lump sum can be used to help fund medical expenses, payout your loans or whatever it is that you require at that time.

Planning for the future is important but those plans can go straight out the window if something devastating like a serious health issue happen to us. While we cannot protect against the emotional, mental and physical consequences of something happening we can protect against the financial aspects using a combination of insurance policies protecting us against death, illness and injury. Insurance however is complicated and there are differences between the policies offered by insurers. To ensure that you not only have the correct amounts of insurance in place but also the right insurance policy for you please contact the JBS office on 03 8677 0688.

*2002 Report of the Disability Committee, IAA
**AIHW (2008) Cancer in Australia: an overview 2008
***Access Economics Pty Limited (April 2007) Cost of Cancer in NSW, Report for The Cancer Council NSW.
^’National Road Safety Strategy 2011-2020’ – Australian Transport Council, May 2011

– Liam Rutty –

Since I belong to the millennial generation which is deemed as probably the most confused generation of all time, I want to discuss how we are stuck between the ‘now’ and the ‘future’. This generation has been described as the trophy kids who are rewarded just for participation but are also the most entrepreneurial generation. We are the ‘live in the moment’ generation, but also the most educated generation that wants to have a secured successful future. So how do we bridge the gap between our want to live in the moment and having a comfortable future?

We are a generation that was either studying or entered the workforce during the financial crisis which triggered a shift towards prioritising quality of life, experiences and adventure over money. I can’t count the number of times I have been tempted to try out a new restaurant with a fancy ambience or taking a short trip over the weekend just because I can afford to do so now. However, this disturbs the long-term plans, especially financial plans. I have been hearing a debate for quite a while now where millennials are considering whether to live in a rental house all their lives and use the money on travel, adventure, etc. or to pay loan instalments for 20-30 years to get your own house. I personally think this is a choice of lifestyle people must make. If you are happy with moving around house to house in your post 60s age then sure do that, but will you really be able to do that?

Our generation does tend to save, but only for short term goals, such as to take a trip in the next 6 months or to buy a new phone. The thought of saving for a house, for our unborn children’s education or our own retirement seldom crosses our mind. Sometimes I don’t even want to check my bank account balance to avoid disappointment and stress!

I think a balanced lifestyle can be achieved because the good news is that we are a smart generation that has access to information instantly and have parents or elders that have done a commendable job on savings and efficient future planning. Take 1 to 2 days to figure out your current income and expenses and your future financial goals (doesn’t have to be very detailed as I am sure at this age it’s not easy to figure what you want to do 30-40 years down the line), 1 day to discuss with your parents to give you tips based on their experiences, 1 day to research on different financial tools to help you record your incomes & expenses and if required 1 to 2 days to find and meet with a good financial planner that will understand your goals and help you stay on path. These 6-7 days out of your whole “live in the moment” life – which most of us anyways spend on Facebook, Instagram, YouTube and Snapchat – will help you to keep living in the present and have a set strategy in place for your future as well.

So, having an expert by your side will be a good idea because apparently, we are also the laziest generation of all times!

– Aakash Mehta –

My partner and I have always taken it upon ourselves to build towards our family’s financial future. Having a roof over our heads and bills paid was one thing but we also wanted savings put aside each week for a rainy day, some savings in the kid’s bank accounts and back up plans for unexpected life events. From time to time I get asked how we’re able to have a mortgage, with 2 kids and think about saving all with me being the only one working. I simply explain that it all comes down to planning well before committing ourselves to any major long term commitments. Then it’s just a matter of defining the steps required and sticking to our guns.

Before we bought our home we decided that it was important to set out the financial ground work regarding what we needed to do in order to fund our loans, living expenses and at the same time able to save each week. So we sat down to determine what our repayments and bills would be once we moved into our home. From there we were able to work out the exact amount we were realistically able to save each week and made a commitment to put those funds aside without fail. Furthermore we made a commitment to put aside funds each week into our son’s bank account. Again this was a realistic figure and we stuck to it each week.

The main point we focused on was to be realistic in what we set out to achieve and how much we could achieve. Often I would think to myself that I’m able to save a certain amount each month; however my bank account does not reflect my theory. Once our second child was born, we again went through the same process to ensure we were continuously building towards our family’s financial future.

We also knew that having a saving’s plan and strategy in place wasn’t enough. Being the sole income earner of the family, I also took it upon myself to ensure my family was protected if I was suddenly unable to earn an income. Several months before we bought our house, we discussed the amount of personal insurance I would require in unforeseen circumstances, which takes into account future long-term loans and living expenses. I then made sure my personal insurance cover was all in place months before we started to look for a house. As you never know what might happen.

Having a financial goal for our family’s future is great but to achieve it, planning and commitment is key. Time and time again we have experienced that thorough planning has many benefits. It firstly provides us with a realistic expectation of what we’re in for and more importantly provides motivation to achieve the financial goals we set. Once our plan is in place it was then up to us to commit, keep each other accountable and more importantly encourage each other to achieve what we set out to achieve.

– Andy –

Employees, you can now get a tax deduction for Lump Sum Super Contributions Prior to the 30th of June.

Previously, as an employee you could only make tax deductible contributions into Super via Salary Sacrifice Contributions. The nature of Salary Sacrifice Contributions are that they must be pre-scriptive, therefore in the event that you have a windfall, sell some assets or decide late in the financial year that you have the capacity to make extra  superannuation contributions, historically it has been difficult or you haven’t been able to.

Since July 1 2017, the ten percent employment rule regarding tax-deductible super contributions has been replaced. The rule meant that a person could not claim a tax deduction on personal Super Contributions if more than ten percent of their assessable income was obtained as an employee. The new rule is now any person under age 65 now may be able to claim a tax deduction on their contributions regardless of their employment arrangement, whilst those aged between 65 and 74 need to satisfy the Work Test in order to be eligible to make a contribution, and subsequently claim a tax deduction.

The following example shows how John was able to save $3,300 in tax by taking advantage of the New Rules:

John works as an employee. He has a salary of $100,000 plus Super Guarantee Contributions of $9,500. He is focusing on reducing his mortgage and at the moment doesn’t have the cash flow to do any additional Salary Sacrifice Contributions. He has however recently decided to take a profit on some shares that he has held for a long period of time. This sale has caused a Capital Gain of $15,000 (after 50% discount).

Prior to the 1st of July 2017, as his income from employment was more than 10% of his total assessable income for the financial year, he wasn’t eligible to do anything about this gain and would simply have to add the $15,000 to his assessable income and pay approximately $5,550 in tax (plus Medicare).

Because of the changes on the 1 July 2017, he is now eligible to make a Lump Sum Tax Deductible Contribution into Super to offset the Capital Gain and reduce his taxable income by $15,000.

By contributing $15,000 into his super as a Lump Sum Tax Deductible Contribution, John is able to save $3,300 in net tax and move his wealth into the concessionally taxed super environment for future investment.

Like all strategies, your own personal circumstances need to be considered as factors such as your level of superannuation contributions (including employer contributions and the contributions caps), can trip you up and cause issues. However, when implemented correctly the new changes do open up a number of opportunities previously unavailable.

If you would like to discuss how these changes could benefit you, please contact the team at JBS.

– Warren Hanna –

To say I have a green thumb wouldn’t be an exaggeration, it would be an outright lie. However I have 2 kids under 5 that would go through a punnet of strawberries every 2 days and therefore I decided it was about time to start growing some strawberries.

Having never grown anything before in my life (does grass count?) I decided to do some internet research to give the strawberries the best chance of survival.

With strawberries you need to have well drained soil, ideally planted in late winter/early spring, and when they start to fruit, you can’t have the strawberries touching the wet soil. Well I managed to have the correct set up and the strawberries began to grow. The kids ate the strawberries and we all lived happily ever after.

Unfortunately it didn’t quite work out that way. It turns out that my kids aren’t the only ones that like strawberries. I found out that growing them wasn’t a problem. It was stopping the local wildlife from eating them that was the main issue.

I got frustrated, I needed to reset and refocus my energy on fixing the problem. My method for growing strawberries was fine so hopefully just some slight tweaks to my strategy to keep the birds away would provide me with the outcome I was after.

My mother in law told me that birds do not like shiny things. Taking her advice my wife and I put foil over the planters and hung foil strips across the front of the plants to try and scare away the birds. Would you believe it, it worked! For about 2 months I had delicious strawberries grown from my own garden.

The strawberry plants have since grown considerably and they now cover up the foil strips and the birds are back to eating the strawberries before I can get out there and pick them. Once again I need to reset and refocus and solve another problem. The next thing I am going to try is bird spikes that will hopefully keep them far away so the kids and I can go back to enjoying our home grown strawberries.

Whether it’s growing strawberries, losing weight, investing or any other goal there will always be hiccups and challengers along the way. It’s important not to give up, refocus on the end goal, reset your strategy, keep what’s working and change what’s not. If you keep with it, I can guarantee you’ll be in a better position than you would be if you would have simply given up.

– Liam Rutty –

It’s been more than 6 months since the Superannuation reforms came into force on the 1st of July 2017, and now with the Christmas break over and done with and most likely back to your day to day routine, now is as good a time as any to re-focus on your Superannuation.

One of the more prominent changes to Super that came into effect was the removal of the concessional tax treatment of Transition to Retirement Pensions (TTR Pension). Pre 1 July 2017 any money held within a TTR pension received a 0% tax rate on any income or realised capital gains, however post 1 July 2017 money held within the TTR pension is taxed at 15% (same as accumulation).

However, any funds that are held within an Account-Based Pension still receive the 0% tax rate (for balances up to $1.6 million). Unless you’ve met a condition of release, such as attaining age 65, you’re unable to commence an Account-Based Pension. The most common conditions of release are:

– Reaching preservation age (currently age 57 – depending on your date of birth) and retiring
– Reaching age 65

For superannuation purposes, a member’s retirement depends on their age and future employment intentions. A person cannot access Superannuation benefits under the retirement condition of release until they reach preservation age. At this stage, the definition of retirement depends on whether the person has reached age 60.

If you’re under age 60, then meeting a condition of release is a bit harder, effectively you generally have to completely cease employment and have the intention never to again work more than 10 hours per week. However, if you’re over age 60 (but under age 65), simply having a change of employment post age 60 means you may be able to satisfy a condition of release, opening up an opportunity to move your Super wealth into the tax-free pension environment.

For example, let’s say John (age 62) works full-time in a Supermarket, but for 6 weeks he was contracted to work on the Weekends as a Labourer. After 6 weeks John has stopped work as a Labourer, because of this John has now met a condition of release and can move his Superannuation savings into the tax-free environment. However, any later contributions made (employer and personal) and earnings will be preserved (i.e. can’t be accessed until a new condition of release is met).

Based on the above, if you’ve been operating a TTR Pension and potentially could meet a condition of release, you may be able to continue to receive the tax-free pension on your Superannuation benefits. Here at JBS we can help assess your options in relation to meeting a condition of release.

– Peter Folk –

The great thing about welcoming in a new year is it gives us an excuse to reset things in our lives, whether it be our lifestyle, expenses, finances and the list goes on. We find the best way to do this, is setting yourself some goals that you can work towards.

Start off by sitting down, including with your loved ones, and write out all your goals. Write them down no matter how small, silly or crazy you may think they are. They also don’t necessarily need to be goals that involve spending money, and can even be things you want to work towards over the next few years.

Once you’ve written down all your goals, you then need to work out which ones are the most important to you, and start prioritising all your goals from the ones you feel are really important and want to achieve first, to the ones that maybe can wait until you’ve achieved the others.

The final thing to do is work out the cost (if any) of achieving each of your goals and your expected time-frame on achieving that goal, i.e. is it something you want to achieve in the next 6 months or something that you want to achieve by 2020 for example. Once all these details have been panned out, it can then make working towards your goals easier, because now you know which ones you want to work towards first, how much it’s going to cost you (so you know how much you need to start saving), and finally what your time-frame is.

Another handy thing to do is sit down with someone else and talk through your goals with them, who knows they may even be able to give you some insight on how best to achieve them, or potentially help you get your priorities right. Here at JBS we are big believers in setting goals and working towards them so we’re always happy to talk through your goals and work on a plan to achieve them, so don’t hesitate to pick up the phone and give us a call!

– Peter Folk –

What a year 2017 was for investment markets with equities providing double digit returns across the board with Asian Shares being the outstanding performer with a whopping 41.10% return. Australian Shares were more modest with a 10.15% return while International Shares as a whole had a return of 20.25% for the year.

In this growth stage it is understandable that defensive assets such as fixed interest and cash did not perform quite so well, with International bonds performing the best of the defensive assets at 7.70% and cash having a 12 month return of 1.7%.

While we should celebrate the performance, the job is only half done as this performance may have done some interesting things to portfolios and in particular asset allocations.

Many clients come to us with a default Balanced portfolio (as listed below) within their super and investments, if we assume this, then the asset allocation as a result of 2017’s performance may have the following unintended asset allocation changes.

As you can see, the risk of this portfolio is now greater than what is was a year ago with an extra 2% allocated to growth assets and in particular to International Shares. The longer this goes on the more variance the portfolio will have from the initial allocation if your portfolio is not reviewed regularly.

You may think that this is a good idea as it means that more funds are allocated to the highest performing asset class of the previous year and less funds are allocated to the lowest performing asset class of the previous year. However this is often not the case.

The below table shows the return of each developed market (the different colours) from 1997 to 2016 as at the time of this writing the 2017 figures had not yet been updated.

As you can see the returns are completely random and what happens one year has no impact on what may happen in future years. Very rarely does the previous best performing market continue to be the best performing market in the next year and it may even turn into the worst performing market. The reverse is also true when it comes to poor performing markets.

A set and forget investment strategy may seem simple and a good idea, but it can result in you taking on more risk (or less risk) than what you initially intended. This means that your portfolio may not match your intended return characteristics and you may find yourself disappointed in the outcome.

At JBS we regularly revisit our clients portfolio’s to ensure that they continue to match expectations around risk and returns. If you would like us to review your investment allocation to ensure it continues to match your goals, call one of our financial advisers who will be happy to help you.

– Liam Rutty –

We live in a seriously fast paced world where we are surrounded with negative information on a daily basis. Majority of us have access to at least one smart device that will notify and keep us up to date with news/major events and keep us connected on social media. Taking on negative information or experiences on a regular basis can interfere with our mental health and can have a negative effect on our work, relationships and our everyday functioning.

There are many things that happen in our life that can disrupt our emotional health, these things include:

– Financial stress
– Dealing with the death of a loved one
– Suffering illness or injury
– Moving or selling a house
– Having children

Poor emotional health can weaken the immune system so developing good emotional health, having positive surroundings, regular routine, support network and understanding your thoughts and feelings are all ways to help reduce feelings of stress, sadness and anxiety. Ideally we should try to escape our busy schedules at least once a day, find our ‘happy place’ (gym, yoga, read, meditate) and just take some time for yourself.

Celebrating your daily wins can make a huge difference with your emotional health. You may want to use a journal to keep track of things that make you feel happy or peaceful. Relaxation methods such as mediation, playing/listening to music or exercising are ways to relieve tension and shift your mind from negative thoughts.

There is also an app called “WinStreak” where you can set daily affirmations and reflect on the top 3 wins to celebrate for the day and 3 things to focus on or you look forward to the following day. If you do this before bed, no matter how bad your day has been, you can end your day in a positive mindset.

JBS is here to help relieve the financial stress from your life, get in touch with us today so you can live a positive balanced life.

– Pj –

Towards the end of each year we always focus a lot on celebrating Christmas and New Years, however there’s something else we could also celebrate post-Christmas. We’re talking about celebrating your family’s financial security by having personal insurance in place. Having personal insurance cover in place means you and your family won’t have to deal with financial stress in the event of you being unable to earn an income or even passing away. Ideally all your personal insurance covers should be in place prior to the “Silly Season”, however if you haven’t done so already the new year is a perfect time to review your insurance needs.

With all the festivities and celebrations over and done with, for most of us it’s now time to pick up the pieces and start the New Year a fresh, which is a perfect time to review your personal insurance needs. Research from one of Australia’s largest personal insurance companies have found that only 37% of Aussies aged between 18-69 actually have life insurance and even more disturbingly only 18% have disability cover and income protection insurance. Further findings include how Australians are grossly underinsured. It’s estimated that the underinsurance gap in Australia is approximately $1.8 Billion, meaning there are a lot of Aussies out there who believe they have sufficient insurance cover, but in fact don’t. For most of us, we don’t like to think about insurance and when asked about how much we have, the first response is usually “I don’t know”.

So we come to a point where you should ask yourself, do you need personal insurance? The main reason you would put in place insurance cover, is to secure your family’s financial wellbeing. So if you have a mortgage, loans, kids etc… chances are you will need personal insurance. The question you have to ask yourself is, “if I’m unable to earn an income tomorrow, what would happen”? Then for those of you that already have some form of insurance cover in place, the question you should ask is “how do I know the level of insurance I already have in place now is adequate?” The short answer is to seek professional advice.

Whether you don’t have any insurance at all or looking to review your insurance needs, the best thing to do is see someone who is a professional in the area. Financial Planning firms such as JBS Financial Strategists will be able to determine what your insurance needs are and then formulate a strategy to ensure you have the correct and adequate cover in place. So as a new year’s resolution, do yourself a favour by ensuring you have adequate cover in place so you’ve got something else to celebrate about (your family’s financial security).

– Andy Lay –