Every day is a weekend when you’re retired. You’ve spent years taking care of everybody else. At this stage of life, it’s all about you. But there is one thing that bothers you. And it’s a question that bothers a lot of retirees: “Will I run out of money in retirement?”

In this final part of our 3-part series, we tackle the concerns and financial worries of a retiree couple with an unusual approach to investing. The problem is that while they have almost $1 million in assets, they are concerned about cash. Let’s meet Bob and Jill.

Bob and Jill’s dilemma

An excessively-aggressive investing strategy threatened to derail Bob and Jill’s retirement. In hopes of growing their money faster, they embarked on an aggressive investing style over the last 10 years and only invested in direct property and blue-chip shares (with big brand names they’re familiar with).

Bob, 64, had always been keen to do his own thing. Being an electrical engineer, he designed and developed electrical systems and worked on large-scale electrical systems all his life. A prolific reader, he felt he knew something about everything. He’d follow the property market and share market whenever he can. So, when asked about his financials, his reply was “I know what I’m doing.”

Jill, 62, was a legal secretary for a number of years until a hip procedure prevented her from commuting to work every day and soon moved to casual work locally. Jill wasn’t as convinced as Bob about shares and had opted to invest her superannuation conservatively. “She’s always been conservative. That’s ok. I know what I’m doing”, Bob remarked.

The family home is paid off and they have no other debts. They hold a jointly-owned investment property with a market value of approximately $600,000, a combined balance of around $500,000 in their superannuation accounts and a parcel of shares valued at around $200,000.

The problem

Bob and Jill have always managed their own investments. Money was never an issue and they never went without. Now that they’re retired, they had difficulty understanding how much income to draw to meet expenses and have been selling down their shares with no thought of tax implications.

They’ve now stopped work, and while rent continues to come in, they have been selling down some shares to meet the cash shortfall. They have been talking to their neighbours, Alan and Pam, whom retired 3 years ago, about drawing from their superannuation.

They have a portfolio worth just over $1 million but they have no cash! Would they need to sell their investment property to free up some cash? They want to feel secure knowing that their investments will provide them enough income to last them throughout their golden years. Bob and Jill want to know their options.

3 money makeover tips for Bob and Jill

Here’s how Bob and Jill can get back on track without sacrificing potential growth on their retirement portfolio:

• Restructure to reduce risk. They have plenty of assets but it could be better structured. They manage the property themselves and hold around 30 different shares. Their superannuation are in default options. Overall, their asset allocation is suitable for growth style investors. Staying in this position can be detrimental to their portfolio as they have too much risk. They will not have time to recover from setbacks. While Bob classifies himself as an aggressive investor, Jill is more conservative. They’ll need to find an approach they’re comfortable with. For example, a well-balanced portfolio with enough exposure to equities to combat inflation and sufficient exposure to fixed interest and cash to provide income payments. They may also need to consider transferring assets to superannuation to take advantage of tax-free earnings and capital gains when in pension mode. Before cash runs out, it may be necessary to sell the investment property as well.
• Know your numbers. When you have an idea of how long you’ll be retired for, how much you need for living expenses and for discretionary spending, you’ll be better placed to work out how much you need to draw from your assets and how much return you need to make it last. Budget for at least 85% to 100% of pre-retirement income since the first few years of retirement is always more expensive – because you’re likely to do more of the things on your bucket list in the first 2 years. It’s also important to assume the age pension as a back-up, and not your main source of income. In addition, think carefully before gifting to children as this can create a big dent in your portfolio. Australians are living longer and healthier lives, so expect to live another 20 -30 years after retirement. That’s a long time to ensure your investments work as hard as they can to generate enough growth and income to support you.
• Constantly review your investments. Please don’t do this weekly. Check for under-performers, compare alternatives and eliminate unnecessary fees that may erode your capital over the long term. This is not an easy task as you need to know where to get reliable information from and that you’re making like-for-like comparisons. It may be beneficial to consolidate your assets using a portfolio manager product, in order to have a clear and disciplined approach to investing. This will reduce your paperwork and provide more transparency when it comes to knowing your investment returns, taxation and fees. If in doubt, call in the experts.

A message of hope

Managing your retirement portfolio is just one element of financial planning. It might seem scary doing it all yourself. But there’s good news, and we’ve got a message of hope for you.  Because hope is greater than fear.

When you’re in a crisis, facts are your friends. It makes sense to consult a Financial Planner who will help guide you to the facts so that you stand a greater chance to experience a more successful and enjoyable retirement.

If you have questions about these action plan ideas, or need some reassurance, we are here to help you. We can provide you with the investment and financial planning strategies—and sympathetic ear—that you may need right now. Reach out to the JBS Financial team here.

We wish you good health and safety.

As government-mandated lock-down comes into force, there are some existing risks to small business that could be felt more acutely if precautions aren’t taken. That’s right, it’s time to rethink your cyber-security protocols.

Small businesses are already experiencing a financial downturn as a result of COVID-19.

Now, governments in Australia and New Zealand have announced further measures to restrict business activity to the bare essentials in a bid to prevent people meeting face to face and spreading the virus further.

This is resulting in an increasing number of workers and business owners reorganising their life around working from home.

Key COVID-19 lock-down concerns for small businesses:

• Lock-downs are in place, so priority #1 is figuring out how to continue trading, where possible
• For those who can do so, remote work is quickly becoming the norm, but this is causing challenges of its own
• Small businesses aren’t all prepared for remote work and may not be aware of additional cyber-security measures that should be taken
• MYOB has offered 11 tips for improving your cyber-security in lock-down below

And while that may be fine for those in larger organisations where systems and processes related to remote work have been in place for years, many small businesses are struggling to adjust.

“As we’ve watched countries across Europe effectively lock down their economies, it is becoming increasingly clear that businesses will be looking for ways to keep their operations running, and we should be providing support to enable them to do so,” said MYOB’s NZ country manager, Ingrid Cronin-Knight.

“Most SME’s will not have experienced a disruption to their business of this magnitude, and while technology has enabled more flexibility to connect in a virtual environment, many businesses will not have the knowledge or capability to implement such a significant change quickly and safely.

“Alongside the technical challenges of scaling up their work from home operation, are the risks – potentially very large – of securing these businesses against cyber-attack.”

Cronin-Knight said security experts are warning about the risks of large scale moves to remote working, as cyber criminals seek to exploit the opportunity of more businesses moving online.

According to the MYOB Business Monitor survey of 1,000 New Zealand SMEs, almost a third (29 percent) of the nation’s businesses have been the victim of a cyber security breach in the form of malware, online scam, hack, phishing or ransomware attack.

The Australian Competition and Consumer Commission’s Scamwatch has also received multiple reports of COVID-19-themed scam texts being sent to the public, so it’s not hard to imagine government lock-downs will create an ideal environment for scammers, hackers and fraudsters.

Mitigating the risks to business of working from home

As working from home programs becoming increasingly prevalent to reduce the spread of COVID-19, cyber-security will therefore become a key risk to be addressed by SMEs implementing this model.

MYOB’s head of product, SME, Dale Dixon says in the rapidly changing environment businesses should be as prepared as they can be for remote work, with clear guidelines on how to protect themselves and their businesses as best they can.

“If we follow the same path as many other countries and go into ‘lockdown’, businesses will look to keep their operations running by implementing remote working technology,” said Dixon.

“Not all businesses will have the knowledge or capability to implement a significant change to how they work quickly and safely.”

That’s because staff members working from home may not have access to the same tools and information an entire business has when planning cyber-security measures, and the staff who would normally support them don’t have the same access they usually would.

There are several actions that SMEs can take to protect themselves online including updating all software with the latest security upgrades and patches, installing and updating firewalls on home services and using technology to enable password protection, such as 2-Factor Authentication (2FA).

In addition, it’s important to educate other home occupants, including kids, on the risks of scams, malware and phishing attacks that could infect devices.

Further, small business owners should seek to protect business communications by using a VPN or another secure communication method when connecting to your business over Public WiFi services.

“It’s important that all businesses consider the key security and continuity risks involved in transitioning to a remote working operation,” said Dixon.

Security recommendations for SMEs working from home:

1. Update all software and operating systems with the latest security updates and patches
2. Make sure firewall technologies are installed and configured appropriately on systems used at home
3. Keep all endpoint protection services, such as anti-virus and anti-malware software enabled and updated
4. Ensure routers and other telecommunications equipment don’t use default passwords and credentials.
5. Use multi-factor authentication (2FA) for all remotely accessible services and systems where possible (2FA creates additional security by requiring a one-use code generated by an authorisation app)
6. Update filtering for spam and malware on email systems
7. Make sure backups are in place on all key systems and data
8. Don’t store customer data without adequate security
9. Keep staff informed of all incident response procedures as they apply to remote working
10. Make certain that administrators or privileged users are aware and follow all security processes and procedures
11. Provide adequate security awareness training regarding staying safe at home

As a small business, what have you done to insure your business is protected? Taking care of business isn’t just about your cyber-security but it’s also about insuring your and your business for any unexpected eventualities. Chat to the JBS Financial team on what you need to do to protect your business.

Source: MYOB

You deserve to retire with enough money to do what you want to do when you want to do it. But there’s a problem….

• There’s information overload
• You have bad money habits you want to replace
• You’re unsure about seeking advice to help make better decisions

In this part 2 of our 3-part series, we turn our attention to those of you who are less than 10 years away from retirement: the Pre-Retirees.

We’ll take you from knowing why to understanding how to maximise personal wealth, in preparation for your holiday of a lifetime: your retirement.

 Pre-retirees: a little bit about you

At this stage in your life, you’re likely in one or a combination of these situations:

• Paid off or almost paid off your mortgage
• No dependants to support
• A capacity to save
• A comfortable standard of living

 Pre-retirement blues for Tony and Helen

“How can we make our savings work hard to ensure a comfortable retirement?” For Tony and Helen, 57 and 55, it’s the sixty-four thousand dollar question.

“We’d like to be able to retire by 65, but we’re unsure if we can since we still have a small mortgage of $50,000,” said Helen, who works as a nurse. Tony, shares this sentiment, having worked for the same large manufacturing company for the past 35 years.

They have a comfortable lifestyle, eat out frequently, and have a capacity to save at least $1,000 per month. But they don’t know where the money goes.

It doesn’t help that they’re also very financially dis-organised and routinely misplace bills and statements.

“It’s a case of overwhelm”, added Tony, who feels they’re too busy to think about retirement. He is fearful they won’t have enough to retire comfortably so they put off thinking about it.

Mostly, they’re concerned they haven’t started planning for retirement early enough, and admitted they are unsure about investing, given the current economic uncertainties.

Tony and Helen were also keen to help out their three adult children once they’re retired; if they can.

3 money makeover tips for Tony and Helen

Here are some tips to whip your finances into shape:

1. De-clutter your finances
   • Go digital and subscribe to online access for statements. If you find yourself routinely misplacing bills and statements, part of the problem is overwhelm.
   • Set up automatic direct debits to pay bills for recurring expenses like council rates, insurance premiums, and mortgage payments.
   • Buy a shredder for all the unnecessary stuff.

2. Review your spending habits
   • Avoid impulse purchasing. Refrain from using your credit card and use cash whenever possible.
   • Avoid convenience purchases. Re-think if you really need that online shopping, Uber Eats and eBay accounts.
   • Start an envelope budgeting system (2020 style). This is based on the whole psychology of people spending less when using cash instead of cards. You will be far more restrained in your spending when you pull money out of your wallet. It will force you to think twice that maybe you don’t need that item, after all. For the technology savvy, there are apps and other online tools that can accomplish the same objectives such as Goodbudget, 1money, Fudget, Wallet, and Monefy.

3. Start planning now for a successful retirement
   • Design your dream retirement. Start thinking about your retirement goals and how long you have to meet them. How much income do you need to live on? Do you want to go overseas annually? How about that motorhome to tour around Australia?
   • Find ways to save to fund it. Once you know how much your desired lifestyle will cost, it’s time to work out how you plan to save for it. On top of that, you also need to know how long your money needs to last.
   • Plan for longevity. You don’t want outlive your savings. If you want to retire early, it may mean running out of cash and having to depend on the Age Pension for the rest of your golden years. Make sure you’re ok with that.
   • Track your progress. If there’s a gap between your retirement goal amount and your projected savings, now’s the perfect time for you to embark on a savings sprint.
   • Review your estate planning. While you can’t rule from the grave, you’ll have peace of mind knowing your dependants will be taken care of.

A money makeover is not a new year’s resolution

It’s not about new goals or promises to start doing something. It’s not about radical and immediate changes in your finances either.

It’s about a change in your behaviour and building healthy financial habits. Because bad money habits cause unnecessary stress in your life.

Financial management doesn’t have to be complicated. With a little time, effort, and perseverance, you can cut the complexity out of your finances and enjoy more free time and a lot less stress.

 Breaking bad money habits

The first step to breaking a bad habit is awareness. Just like any habit, you must first identify the habits you want to change, identify the underlying cause, and then do something to fix it.

Habits are a process, not an event. Since bad habits provide some type of benefit in your life, it’s difficult to eliminate them. Instead, replace a bad habit with a new habit that provides a similar benefit.

Final Note

Life doesn’t always go according to plan so it’s tremendously helpful in performing reality checks now and then.

It’s important to get back to basics and think long-term. Planning is key.

Whether you are trying to do it yourself or with the help of a professional financial planner, you’ll need time and commitment to take control of your financial future. This includes a change in behaviour and building healthy financial habits.

Remember, don’t let your emotions or bad habits get in the way of saving money for your future retirement.

If you plan early, you CAN retire with confidence prepare for the future you’ve always wanted.

Now is the time to talk to us. Book a discussion with our experienced team from JBS Financial Strategists here and they can take you through how we can help.

You could be forgiven for thinking Australia’s superannuation system is a mess. Depending who you talk to, fees are too high, super funds lack transparency and Governments of all political persuasions should stop tinkering.

Yet according to the latest global assessment, Australia’s overall retirement system is not just super, it’s top class.

According to the 11th annual 2019 Melbourne Mercer Global Pension Index, Australia’s retirement system ranks third in the world from a field of 37 countries representing 63 per cent of the world’s population (see table). Only the Netherlands and Denmark rate higher.ⁱ

Source: Melbourne Mercer Global Pension Index p.6

What we’re getting right

While super is an important part of our retirement system, it’s just one of three pillars. The other two pillars being the Age Pension and private savings outside super.

Writing recently in The Australian, Mercer senior partner, David Knox said one of the reasons Australia rates so highly is our relatively generous Age Pension. “Expressed as a percentage of the average wage, it is higher than that of France, Germany, the Netherlands, the UK and the US.” ⁱⁱ

As for super, we have a comparatively high level of coverage thanks to compulsory Superannuation Guarantee payments by employers which reduces reliance on the Age Pension. In fact, Knox says Australia is likely to have the lowest Government expenditure on pensions of any OECD country within the next 20 years.

Knox says superannuation assets have skyrocketed over the last 20 years from 40 per cent of our gross domestic product (GDP) to 140 per cent. “A strong result as funds are being set aside for the future retirement benefits of Aussies, vital for an ageing population.” Even so, on this count we lag behind Canada, Denmark, the Netherlands and the US.

Room for improvement

For all we are getting right, the global report cites five areas where Australia could improve:

• Reducing the Age Pension asset test to increase payments for average income earners

• Raising the level of household saving and reducing household debt
• Require retirees to take part of their super benefit as an income stream
• Increase the participation rate of older workers as life expectancies rise
• Increase Age Pension age as life expectancies rise.

Retiree advocates have been asking for a reduction in the assets test taper rate since it was doubled almost three years ago.

Since 1 January 2017, the amount of Age Pension a person receives reduces by $3 a fortnight for every $1,000 in assets they own above a certain threshold (singles and couples combined). Prior to that, the taper rate was $1.50 for every $1,000 in assets above the threshold.ⁱⁱⁱ

Other suggested improvements, such as increasing the age at which retirees can access the Age Pension, present challenges as they would be deeply unpopular.

The Retirement Income Review

One roadblock standing in the way of ongoing improvements to our retirement system is reform fatigue.

In recent years we have had the Productivity Commission review of superannuation, the banking Royal Commission which included scrutiny of super funds, and currently the Retirement Income Review.

The first two resulted in a flurry of recommendations and legislation. Such as the Protecting your Super rules which came into force on 1 July 2019 which are designed to protect members’ super balances from erosion by fees and unnecessary insurance.

The Retirement Income Review will focus on the current state of the system and how it will perform as we live longer. It will also consider incentives for people to self-fund their retirement, the role of the three pillars, the sustainability of the system and the level of support given to different groups in society.

The fourth pillar

One issue that the Government has ruled out of the Review is the inclusion of the family home in the Age Pension assets test.

Australia’s retirement income system is built around the assumption that most people enter retirement with a home fully paid for, making it a de facto fourth pillar of our retirement system. But that ‘pillar’ is becoming a little shaky, with more Australians entering retirement with housing debt or renting privately.

With house prices on the rise again in Sydney and Melbourne and falling levels of home ownership, there are growing calls for more assistance for retirees in the private rental market. According to David Knox, our Age Pension is generous but there needs to be more assistance for private renters. It remains to be seen if this will be addressed in the current Review.

The big picture

Despite the challenge of ensuring a comfortable and dignified retirement for all Australians, it’s worth pausing to reflect on the big picture. The Global Pension Index is a reminder of how far we have come even as we hammer out ways to make our retirement system even better.

If you would like to discuss your retirement income plan, give us a call. 

i https://info.mercer.com/rs/521-DEV-513/images/MMGPI%202019%20Full%20Report.pdf

ii https://www.theaustralian.com.au/commentary/our-retirement-system-is-far-from-perfect-but-its-still-better-than-most/news-story/d3db43e68b3b93d8c6d6e8a8c17a491d?btr=4ff6fe5e96c92f060a779127475fa258

iii https://guides.dss.gov.au/guide-social-security-law/4/2/3

In Australia, special capital gains tax rules apply when dealing with assets of a deceased estate.

The most common types of assets inherited by a beneficiary that could be subject to a capital gain are property, shares and managed funds.

You may have just received (or are about to receive) an inheritance. While this article isn’t a substitute for specialist tax advice it considers some of the capital gains tax implications should you ultimately choose to sell an inherited asset of this nature.

Implications for Australian tax residents

Where you’re an Australian resident for tax purposes and you inherit assets from the deceased estate of an individual who was also an Australian tax resident, the transfer of these assets from the deceased estate is not a capital gains tax (CGT) event, in and of itself. This means that only if you decide to sell the asset at a later point in time, then the normal CGT rules apply.

In this scenario, CGT outcomes are an important aspect to consider when selling inherited investments like shares, managed funds and investment properties.

The sale of the family home may receive the ‘main residence exemption’ which means that CGT will not apply. However, this an area where advice is best sought.

Note: where a family home was used for investment (income producing) purposes at some stage, only a partial main residence exemption will occur. We discuss this in a little more detail below.

Implications for non-Australian tax residents

Where the deceased individual was an Australian resident for tax purposes, if you’re a non-Australian tax resident CGT may be applicable.

Depending on the type of asset inherited and the circumstances involved, this can be an especially complex area, so specialist advice is key.

Other Capital Gains Tax considerations

Generally speaking, if the asset is:

• a collectable asset, such as rare stamps, then CGT may apply depending on a host of circumstances
• a personal-use asset such as jewellery, a car or boat CGT will typically not apply.

Capital gain (or losses) on an inherited asset

There are several considerations involved in calculating a capital gain or loss. Some of these can include:

• the type of asset, and how it was used prior to the deceased’s passing;
• the deceased’s date of death;
• the date the asset was inherited;
• your ownership period, prior to selling the asset;
• whether you are selling the asset as an individual Australian tax resident, or not.

Did you know:

Inheriting a family home may involve CGT when it is sold. This depends on a few factors, such as when it was bought, when it was sold and if it was used for investment purposes at any time during the ownership period.

You should keep detailed financial records related to an inherited asset. This information is needed to determine if there’s any CGT payable later when the asset is sold.

The JBS Team can assist you in understanding any tax implications of inheriting an asset, based on your personal circumstances, objectives and goals. Click here if you would like to discuss any estate planning concerns you may have.

Source: Perpetual

Taking action on your money to be financially-free can help you fulfil your needs while enjoying a less stressful life. These financial principles can be applied by different people at different stages of life.

You could be a small business owner looking to extract more freedom and value from your business, or a pre-retiree starting to test the waters on your readiness for retirement, or a retiree wanting peace of mind that they won’t outlive their money.

Being financially-secure is empowering

Being free from debt, having a cash reserve, owning your own home and knowing how to make your savings multiply holds the key to financial freedom.

The best part: Financial success is within reach of every person, regardless of income or age. In fact, these ‘secrets’ are based on sound financial principles.

The secrets to acquiring money, keeping money and making money earn more money have been around for a long time. The success secrets of the ancients were first revealed in a timeless classic, written in the 1920s, through Babylonian parables.

This is part 1 of a 3-part series on money makeovers for small business owners, pre-retirees and retirees. We take a look at their dreams, their goals, and the sacrifices they had to make.

1.       For a small business owner. Some people start successful businesses one after another while others fail to succeed in their first. We look at some of the reasons why and how to fix it.
2.       For a Pre-retiree. If you’re in your late 50s and early 60s, you’d probably still be working. No doubt, you’d be wondering whether you’ll have enough money to retire and whether you can have the kind of lifestyle you want when you stop working.
3.       For a Retiree. Retirement comes faster than you think. So, it pays to be prepared. Would you have enough money to live on during your retirement years? How much you can draw out of your retirement savings each year? How can you manage it to make it last as long as possible.

Overhauling a plumbing business

Meet Dave. He runs and operates a small plumbing business, which recently celebrated its 7^th year. Susan, his wife, jumped into the family business after 5 years. She figured Dave would do the physical work and she would answer the phones and maintain the books. Money will roll in and they’ll be rich. Simple, right?

Wrong.

They dug a deep hole of debt and barely had enough funds to pay wages. Eventually, both Dave and Susan didn’t get paid because while money came in during the month, by the end of the month, there was no money left. Where did the money go? They were planning to retire in 15 years, at age 60, but that seemed like a distant dream.

When the pain of almost losing the business became big enough, they decided to seek help. Something wasn’t working and they needed help to get their financial house in order.

Dave’s father, Harry, convinced them that if they want to turn their business around, they should consult their family’s financial planner. We’d been looking after Harry’s family finances for the past 10 years.

At our first meeting, Dave and Susan discovered their plumbing business was anything but organized. No business plan, no systems, and most decisions were made based on gut feeling.

The business was making money but it also had debt and costs were going through the roof. What went wrong? We sat them down in our office to explain that businesses fail for many reasons and the 4 most common reasons are:

• Lack of planning. Businesses fail because of the lack of short-term or long-term planning. A plan should include where your business will be in the next few months to the next few years, with measurable goals and results.
• Leadership failure. The leader must be able to make the right decisions most of the time. Leadership failures will generally trickle down to every aspect of your business.
• Poor financial management. Decisions should always be based on the information you get from real data. This also includes being on the pulse and knowing how much goes in and out of the business at all times.
• Lack of systems and processes. Businesses struggle and worry about getting things done on time because there are no systems and procedures in place.

3 ways to give your small business owner a money makeover

If Dave and Susan were serious about turning their business around, they needed to focus on the following action items:

1. Make a plan. It all begins with planning. It doesn’t require a 100-page formal document. Sometimes when a business has been running for a few years, it becomes too easy to lose its startup energy. Get back to basics and outline why you’re in business, how you will pay the bills, how you will make a profit and how you will market the business. No amount of planning can be a substitute for action.
2. Know your numbers. Don’t confuse revenue with profit. If numbers are not your thing, hire a financial professional to explain and train you to understand what you need to measure each day, every day to ensure your business continues to be profitable. Staying profitable will solve many problems. A lack of profit could put you out of business even if you have record-breaking sales. Bankruptcy is still possible even with record cash flowing into your business. Be sure to:
   • Know how you spend your money.
   • Know how you use credit.
   • Know what your margins are.
   • Know if you’re spending money to make money.
3. Implement systems and processes. A system is the overall core element you’re looking to have and/or implement in your business. It’s something that helps your business run. Processes is everything you do in order to make any given system work most efficiently. For example, systems are crucial to recovering from a disaster. So, identify the key parts of your business and think about what it would take to recover losing any of them.

Re-capturing the spark

3 months later and we’re pleased to say, Dave and Susan have implemented the above money makeover tips and are making better financial decisions based on data and their business goals. They’re tracking over 10% more in sales in the competitive service market. They now have better financial habits, are familiar with a Profit and Loss, and are no longer racking up debts that they can’t pay back quickly.

Final Note

Every small business can benefit from a money makeover from time to time. Planning for small business is much more than spreadsheets and investment risk models.

Whether you choose to do it yourself or engage the help of a professional financial planner, know that owners who lead businesses to success understand that it takes a carefully planned and executed strategy, not luck.

So, pick one or two of these tips to take action on your money for your small business; it will make your business more efficient and profitable over the long term.

Chat to the JBS Financial team how we can help you take action on your money!

In the wake of recent ferocious bushfires, the climate change debate has climbed the news agenda, with many Australians now considering what they can do to help.

If you’d like your money to make a difference to the environment as well as your future, now might be the time to consider ethical investing.

It’s a growing trend. More than half of all investments in Australia are already invested responsibly and ethically according to the Responsible Investment Association of Australia (RIAA).

Responsible investment takes into account environmental, social and governance (ESG) factors into the investment process of research, analysis, selection and monitoring of investments.

Whether it’s through super, investments or savings, more and more people are reviewing their financial arrangements to ensure their funds are put to work in a way that does no harm, and ideally leaves the world in a better place.

Here are some tips to help Australians who want their finances to be environmentally friendly.

Understand what matters to you

Everyone’s values are different, so you need to first work out what’s most important to you. Do you feel strongly about not investing in fossil fuels? Are you interested in discovering cutting-edge solutions for climate change or is improving energy efficiency a greater priority for you? How will these preferences affect your investment performance? From here you can identify the areas where you don’t want to invest or, conversely, where you’d rather put your money to make a positive impact.

Do your research and get to know the ESG principles

Each investment manager has its own investment policy when it comes to ESG investing. For instance, some may apply a ‘negative screening’ or ‘exclusion’ policy, meaning that they steer clear of certain sectors like fossil fuels. Be mindful of exclusion policies as they may lead to increased volatility in your portfolio. Climate change investing tends to be a form of ‘positive screening’—in other words, actively choosing to invest in companies that are making a difference in areas such as renewable energy.

RIAA is a good resource to use when you’re starting on this journey as it details the investment strategies of ethical and sustainable funds. Many super funds or investment managers also now have information about sustainability and ESG on their websites. Look to see if they have signed the United Nations backed Principles of Responsible Investing and whether they have published their scorecard.

Start with super

Do you know where your super is invested? Does it offer a socially responsible investment (SRI) option? Make sure you read all the information provided by your super fund about the particular sectors, businesses and investment activities considered for investment.

It’s worthwhile knowing that some people believe many SRI options don’t go far enough. Again, it pays to know what matters most to you and then you can find an option that aligns with your values.

Don’t forget the eggs rule

One of the key principles of good investing is diversification—not putting all your eggs in one basket. It spreads risks and ensures you’re not exposed to any single investment or asset class. So consider the risks of crafting a portfolio that’s too narrow and concentrated.

Climate-themed funds also haven’t been around for a long time, with many having only launched several years ago. This makes their performance hard to assess.

We can help

Being a more responsible investor involves a lot of research and working out exactly how far you want your investment decisions to reflect your sustainable and ethical concerns and can be a minefield (pun intended).

For example, you might not want to invest in coal companies, metallurgical coal miners and mining companies, but what about transport companies that freight coal, coal seam gas, oil and conventional gas, electricity generators, or diversified energy generators that may have large investments in renewables as well as coal?

Getting it right when it comes to green investing can be difficult. Start the conversation with the JBS Financial team about your investments and super. Do you know where you’re invested?

Source: AMP

It may not be something you think about much. It may even make you uncomfortable to examine the way you manage money and think about whether you’d be able to cope if you suffer a significant financial setback. But your financial wellbeing can impact every area of your life, so it’s worth taking the time to see if there are areas where you could make improvements.

Let’s take a closer look at what financial wellbeing means – and how you can measure yours.

MEASURING FINANCIAL WELLBEING

 You can measure your financial wellbeing by looking at how you’re doing in each of these four areas:

• Ability to meet your regular expenses – like mortgage or rent, utilities, education and health costs.
• Being in control of your money – by understanding exactly where your money is going and avoiding wasting it on impulse buys or things you don’t use.
• Making choices that allow you to enjoy life – such as travel, hobbies or leisure activities.
• Feeling secure now and in the future – with enough money to cover today’s costs while also saving for what might happen later in life – this includes retirement savings, emergency funds and insurance against events like illness, injury or disability.

MAJOR INFLUENCES OF FINANCIAL WELLBEING

 Your financial wellbeing can have many influences. External conditions like the economic climate, workforce trends, government policies and financial markets can impact your financial wellbeing. So can things that are more personal to you, like your relationship status and housing situation. Demographics such as your health, age and gender may also be an influence.

Of course, the amount of income you earn is a key factor in your financial wellbeing. But a good wage doesn’t automatically mean you have a high level of financial wellbeing – especially if you’re spending more than you earn.

While you can’t control every factor that influences your financial wellbeing, you can change your financial behaviours and attitudes. Studies show that with the right information and support, people can make positive changes to their financial habits and substantially improve their financial wellbeing. 

Here are five ideas to get you started.

1. KEEP TRACK OF YOUR EXPENSES

Having a budget is key to financial wellbeing. To create a realistic plan, start by tracking your income and spending for a month. Remember to include irregular expenses like utility bills and car registration, or expensive times like Christmas. Once you have a realistic picture of your expenses, you can work out where you can make cuts.

2. SET UP DIRECT DEBITS AND AUTOMATIC TRANSFERS

Use direct debits to cover recurring payments. This can help make sure you cover your essential costs first. It also reduces the amount of time you spend worrying about your finances.

3. HAVE A SAVINGS BUFFER

Having no money set aside for emergencies can be very stressful. So, start saving now. Even a tiny bit put away regularly is better than nothing.

4. TALK TO YOUR FAMILY ABOUT MONEY

Having regular, open conversations with your family or partner increases everyone’s financial literacy and understanding. Honest communication about money may also help reduce conflict and stress. 

5. GET EXPERT ADVICE

If you would like to know more about how to improve your financial wellbeing, talk to a financial adviser.

Chat to the JBS Financial team about how you can take action on your money and work towards the life you want to live.

Source: Colonial First State

Investors have faced a low-growth environment with low yield for some time now and this does not appear to be changing anytime soon.

Global economic activity is slowing notably, reflecting a combination of factors affecting the major economies.

Historically investors who look for income in the form of interest payments – also called yield, have looked to fixed income (bonds) and cash (bank deposits) in a normal low growth environment, but with record low interest rates these returns as a measure over inflation have proven harder to find. One of the strategies investors have been forced to look at is to invest into the share market for dividend yield, which is yield paid in the form of a dividend.

This strategy has pushed money into Australia’s traditionally high dividend-paying stocks, also driven by the benefit of our franking credit system – which has in-turn been one of the underlying reasons why our share market and many other developed countries share markets have risen strongly since the Global Financial Crisis in 2008.

The share market can be a generator of income, in the form of annual dividends from companies – but not all companies pay a dividend, and it is not compulsory. However, Australian companies pay out a high proportion of earnings as dividends, as measured by the dividend payout ratio. Listed companies have, on average, paid out 65% of their earnings in the form of dividends from 1917 to today.

Over time, dividends can provide a contribution to the total return earned from shares. In fact, just under half of the long-term return from holding Australian shares comes from the dividend component, looking at the market’s “total return” index, the S&P/ASX 200 Accumulation Index.

Over the last 10 years to June 2019, the S&P/ASX 200 Accumulation Index has generated a return of 10.0% a year, versus 5.3% a year for the S&P/ASX 200 price index – meaning that dividends are responsible for 4.7% a year, or just under 50% of the total return.

The importance of dividend yield in stock selection

A benefit for long-term investors who receive the dividend component of the total return, especially for large, mature companies listed on the Australian share market, is that it can be less volatile than the capital growth component, as such companies tend to ‘smooth’ the payment of dividends through the use of available cash flows, that is independent to the  changes in the company’s share price from time to time.

However, there are several aspects of the stocks-for-yield strategy that make it one that should be constantly monitored. First, a stock market dividend yield cannot be considered as certain, because the dividend amount is at the discretion of the company, each reporting period. Second, the risk of share-price capital-loss, while holding shares for yield, is always present.

How to find high yield growth stocks

For active stock-pickers with a value orientation – that is, those who like to buy  ‘unloved’ stocks at what they see is good value based on fundamental metrics – opportunities might look like they are thin on the ground, but they are usually present: it might just require a harder look.

The key to this process is to think of the businesses represented by the stocks on the stock exchange. Where short-term market volatility is often driven by macro-economic or geo-political events, the underlying fundamentals of businesses are what essentially drive the returns from the stock market, through the “duration effect” of a company’s ability to grow its value over time through the compounding of its cash flow.

From time to time, the stock market will under-value some businesses, and over-value others.

There is little correlation between the performance of individual stock-exchange-listed businesses and economic growth, because each company has specific factors that drive its revenue and profitability.

There are always stocks out-performing the market, and certainly out-performing the economy: whether the investor wants to back these stocks for short-term trading opportunities, or longer-term investment, is up to the investor. But they are always there to be found.

It can all seem very confusing, right! When it comes to your investments whether they are inside your super or out, it’s important to speak with someone that can look at the end game with you. Chat to the JBS Financial team about what your next move should be and make sure you are working towards the life you want to live.

Source: BT

In Australia, people are living longer and interest rates are lower than ever. While the first is good news, the second carries risks if you’re looking for an adequate income to see you through retirement.

Here we look at three elements that affect a post-work reasonable income – interest rates, inflation, and longevity.

1. Interest rates – high valuations, low returns

Historically low interest rates have driven valuations of defensive assets such as cash and fixed interest to unprecedented highs. Generally, a defensive asset is seen as a lower-risk, lower reward investment.

High valuations mean low yields (or percentage income returns in the form of dividends and interest) for defensive assets.

Low interest rates affect variables such as inflation and investment returns, which in turn affect how we save for retirement.

In the high interest rate era of the late 1970s and 80s even relatively low-risk assets like term deposits and bonds offered double-digit returns. These days rates of return are all closer to one per cent.

Similarly, property yields in Australia are around two to four per cent depending on the type of property and geography. Better yields may be available via Australian equities, but many retirees are not in a position to take on a higher level of risk.

2. The inflation perspective

Inflation has a big impact on retirees who are less able to earn and save more after their working lives have finished. Falling returns mean providing for retirement is challenging, but although returns are low now compared to in the past, the impact is eased when you take inflation into account.

Inflation was running at around 15 per cent in the late 70s and 80s, which ate up much of the bond and term deposit returns.

Nevertheless, the combination of low interest rates and low inflation make it hard for retirees to find returns.

There are risks too, should the current global inflation rate of about three per cent shift higher than the defensive asset classes. As these assets are priced for the very low inflation of today, they would face major negative revisions.

3. The longevity conundrum

In Japan, adult diapers are forecast to outsell those for babies within a few years. Many developed countries are having to adapt to the demands of an ageing population.

Australians are also living longer, increasing the risk that a retiree will outlive their savings. Back in 1980, a man starting a pension at age 65 had a life expectancy of 78 – 13 more years. Now, a male starting a pension at 65 has a life expectancy of 86 – an additional 21 years. While this is great news in many ways, financially it means higher income needs and the need to grow the assets over time to make up for rising costs of living.

This is a concern in an environment which sees retirees drawing down on their pool of retirement assets because they can no longer generate sufficient income returns. This means retirement account balances are being depleted relatively quicker than in the past, especially if retirees lack exposure to growth assets to generate some capital growth over their longer lives.

Supporting an ageing population to achieve their retirement goals in a market of lower investment returns is a major challenge. A stable policy framework for superannuation and a long-term approach will be important in giving retirees the best chance of achieving a comfortable retirement.

Don’t worry you have a plan, don’t you? Maybe it’s time to chat to the JBS Financial team to get your plan in place to ensure you can live the life you want to live.

Source: AMP