OPINION

What does a financial planner do?

Some years ago at a Christmas barbeque I met a man named Alex who told me about his plans for a road trip from Sydney to Melbourne.

“A slow, easy drive through the country, visiting local pubs and eating quality local fare,” he smiled.

“Sounds amazing, when are you going?” I asked.

“In February, after schools starts again,” he replied.

A few years later I caught up with Alex at another BBQ and asked him how his trip was.

He sighed and explained that two days before he was due to leave a good friend asked him to come and celebrate his birthday, so he delayed the trip until the next Monday. Then he was hung over so postponed until the Tuesday. Then his mother’s good friend passed away and he felt that he should stay and attend the funeral. At the funeral, his best friend invited him out to go out clubbing with some single girls.

Three years later he still hadn’t done the trip.

“I guess one day I’ll do it,” Alex laughed bitterly.

I couldn’t resist asking him if he’d actually made plans for his trip.

“Did you book any accommodation; did you plan your route? Did you pack clothes, money, gear to take with you, or organise how long you will stay in each place?

“Sort of… not really,” he replied.

This is exactly what happens with our lives and our financial planning.

Financial Planning Process
We have the best intentions of creating financial planning strategies. To go somewhere, somehow, some time, but we fail to plan where we want to go, in what time frame, and how to get there.

Life gets in the way.

By deciding to go on a road trip you have completed only one third of the task. You have developed a loose target – to visit Melbourne. By deciding how to go: car, plane, bike, train, it enables focus to prepare the vehicle that will take you, the route you will take and the time frame for the journey.

When people ask me “What does a financial planner do?” This is the analogy I offer them.

We help you develop financial planning strategies to provide you the right vehicle to plan your journey inside your available time frame.

We are just the tools to achieve your goals as part of the financial planning process. The desire, the commitment and the determination must come from you. With those, you can have a comfortable journey, at your pace, to your preferred destination.

Do not be like Alex who every year dreams that one day he will go on his journey.

Contact us for a free financial planning strategy consultation.

Superannuation planning for young adults

Financial planning and superannuation planning is usually not on the radar of people in their twenties and thirties which is exactly the time when they should be setting themselves up for a strong financial future. Super is capable of providing above average investment returns and with some simple superannuation planning, will set you up for life. However younger people tend to overlook the importance of this opportunity to create wealth, usually for a few key reasons:
• They feel there is no need to worry about superannuation planning because they will not be able to access that money for 20 or 30 years.
• They see it as too hard and time consuming to understand it, control it, manage it and make it work.
• Other more immediate priorities demand attention such as getting married, buying a home or starting a family – ironically the very things that require smart financial planning strategies.

Choosing a Superannuation Fund
When choosing a superannuation fund, assessing its historical performance, fees, charges, insurance payouts and other variables is absolutely critical. However superannuation funds will often present variable data making comparison difficult. Some funds highlight their most recent returns while others highlight returns over a longer period. Some funds, after a particularly bad year, even create new investment funds to ‘reset’ their performance. What you can be sure about is that funds will only ever put their best results forward and detailed assessment of their performance is required.

Here’s why. Let us assume that we have two superannuation funds:
• Superannuation fund A has an 8% return average over 10 years.
• Superannuation fund B has an 11% return average over the same time.

Assume that both superannuation funds have $10,000 to start with, no fees and no other contributions; just set and forget for 30 years. The difference at the end of the first year is only $300. The difference at the end of 30 years is a staggering $128,296 Accounting for inflation of approximately 2.5%, the value of that $128,296 in 30 years is $61,164, simply by choosing a better performing fund. Ask yourself:
• How long do you work to make $128,296? Or even $61,164?
• Is this important to my financial planning strategies?
• Is this worth the time and effort to take action now?
• How much will other super contributions amplify the results?

Smart superannuation planning
Super planning can be the difference between a healthy and happy retirement and one living off Government allowances. Your choice. If you want a second opinion about your super or financial planning strategies, please contact us. We are certified financial planners and accountants in Liverpool with over 35 years’ experience meaning we hold deep understanding of the financial planning process integrated with tax effective strategies.

Dimitri Argyros | Director | S&Y Private Wealth

A wise man once said to me: “Do not let a small issue become a big issue; Have faith in small savings, they becomes big savings sooner than you think; Time is your friend when you are young, do not abuse him, he is very vindictive.”

Splitting Superannuation Contributions

There are two ways to make superannuation contributions on behalf of your spouse:
• From your after tax income direct to your spouses’ superannuation account, or
• Split your concessional contributions that have been made to your superannuation account, with your spouse.

Superannuation Contributions made after tax.
If you make superannuation contributions to your low or non-income earning spouses’ superannuation from your after tax income to you will be entitled to a tax offset of $540 per year if your spouse’s assessable income is less than $13,800. This tax offset that you receive could be enough to cover insurance in your spouse’s superannuation account, effectively could provide insurance for your spouse with an additional discount of $540.

Splitting Concessional Superannuation Contributions
Splitting Superannuation Contributions with your non-working or low income earning spouse may assist in both of you reaching financial security goals in retirement.

Contribution splitting is ideal for anyone that has taken time out of the workforce to care for children, care for other family members, or study. Contribution splitting allows you to split your concessional (pre-tax) contributions with your spouse. Concessional contributions include employer and salary sacrificed contributions.

Only contributions from the previous year can be split, and your receiving spouse must be under the age of 65. Once the contributions have been split into your spouse’s account, it becomes their money, you will have no right to access this again.

The maximum amount that you can contribute to your spouse’s superannuation is the lesser of:
• 85% of your concessional contributions for the year, or
• Your concessional contribution cap for the year.

Contributions splitting is beneficial because:
• You can top up your spouse’s income allowing you both to be able to withdraw a maximum lump sum tax free from your superannuation (currently $195,000) if you are planning to retire before 60,
• You can access cheaper insurance for your spouse through superannuation and use the contributions splitting so that the insurance premiums do not erode the value of your spouse’s superannuation,
• If one partner is older than the other, splitting contributions to the older spouse will allow you to access these superannuation benefits at an earlier stage, and
• Improve your Centrelink position by splitting contributions back to your younger spouse.

Note that not all superannuation funds allow contributions splitting. Please contact us if you want to review your superannuation contributions, or split contributions with your spouse. We are certified financial advisors and accountants in Liverpool with over 35 years’ experience meaning we hold deep understanding of the financial planning process integrated with tax effective strategies.