If you think your employer isn’t paying your super contributions, follow the steps below:

1. Am I entitled to super? – you should confirm that you’re entitled to super before taking any further steps.

2. Go to ATO online via myGov to view super contributions that have been paid into your super fund by your employer. If your employer has commenced Single Touch Payroll reporting, you can check if your super has been paid into your super fund. Your employer will tell us how much super they’re required to pay to your fund.

3. Use the Estimate my super tool if you’re unsure how much super your employer should be paying.

4. Talk to your employer. Ask them how often they’re currently paying your super, which fund they’re paying to and how much they are paying.

5. Confirm how much your super fund has received by checking member statements from your super fund.

6. Lodge an enquiry. If you’ve completed all of the steps above and still believe your employer isn’t paying enough (or any) super – or isn’t paying to your chosen fund, you can report your employer using our online tool.

Our collection approach to unpaid super

If your employer doesn’t pay the minimum amount of super into the correct fund by the due date, they may have to pay the super guarantee charge (SGC).

The ATO may investigate an employer’s super guarantee compliance on their own initiative or in response to an employee enquiry. If they determine that your employer (or former employer) has not complied with their SG obligations for you, or the ATO reasonably suspects this to be the case, they may disclose details of this to you.

From 1 April 2019, the law allows the ATO to disclose an employer’s non-compliance to affected employees even if they haven’t lodged an enquiry.

The ATO prioritise the collection of unpaid SGC debts. They work with employers who engage with them to address their debt. For those that don’t engage, they’ll take stronger action. This can include:

• director penalty notices

• garnishee notices.

If you’ve chosen to report your employer, the ATO will keep you updated throughout the investigation. If they establish there is an SGC debt, they’ll inform you of the recovery actions they’re taking.

If they commence an investigation into your employer and you haven’t lodged an enquiry with them, they may notify you of the review. If you receive this notice, you don’t need to take any action; they will advise you of the outcome when the investigation is complete.

Any SGC they collect from your employer is distributed to your super fund.

Contact us today if you would like to find out more about your super contributions on Phone: 07 5641 4134.

Source: ato.gov.au
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Individuals/Super/Growing-your-super/Unpaid-super-from-your-employer/.

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Knowing how your mind works can help you avoid the more obvious traps many investors fall into.

Cognitive bias has become a bit of an investing buzz phrase in recent years.

The theory is that the human brain predictably makes errors of judgment that can lead us to be emotional, short term and come to other incorrect conclusions.

Cognitive bias has been of particular interest to the investing community and long lists of biases – confirmation bias, anchoring, the recency effect and dozens of others – are now the stock-in-trade of beginner investors worldwide.

The Nobel-prize winning economist Daniel Kahneman first researched bias in human thinking, distinguishing two ways in which we think: an automatic, instinctive and almost involuntary style contrasted with effortful, considered and logical thought.

That original research has grown into an industry.

Researchers and psychologists have identified endless ways in which the human brain is prone to bias, errors and poor judgment – and the investing community has latched on.

But underlying it all is that original finding that we spontaneously seek an intuitive solution to our problems rather than taking a logical, methodical approach.

Kahneman wrote that when we are confronted with a problem – such as choosing the right chess move or selecting an investment – our desire for a quick, intuitive answer takes over.

Where we have the relevant expertise, this intuition can often be right. A chess master’s intuition when faced with a complicated game position is likely to be pretty good.

But when questions are complex and rely on incomplete information, like investing, our intuition fails us.

The very fact we find the concept of cognitive bias so appealing is simply another example of our innate desire for simple, intuitive answers.

Unfortunately, the world is complicated, and almost everything that happens in investment markets emerges from the combination of a web of unrelated, intricate and multi-faceted events.

Our bias towards simplicity is reinforced by the nightly news and the morning newspapers that persist in providing simple explanations for complex events. Each day, market movements are distilled into ‘this-caused-that’ explanations that obscure the true drivers of change.

It is our intuition that is reacting when we find ourselves excited that markets rose 100 points – and a little nervous when markets ‘wipe off’ billions. We experience these emotional reactions even though the effect on our overall wealth from either event is likely to be tiny.

Our understanding of history is similarly simple, reducing wars, recessions and pandemics into simple cause and effect stories that are easy to remember and teach.

These stories help us understand the past. But they do not help us predict the future.

This explains why investment opportunities that seemed certain at the time we made them so often go awry.

It is not bad luck or circumstances changing against us – it’s the fundamentally simplistic cause and effect model in our minds that doesn’t allow us to understand all the possible outcomes.

So how can we best use the science of cognitive bias to become better at investing?

It is certainly worth learning about the wide and growing range of cognitive biases scientists are identifying that can stand in your way of being more successful.

Knowing how your mind works can help you avoid the more obvious traps many investors fall into.

We can use the basic principles of successful investing to avoid becoming victim to our own cognitive biases. Stick to a plan and don’t react to market noise or your emotions. Stay diversified to reduce the risk of permanent loss. And ensure you do not spend too much money on unnecessary fees.

But it is also a trap to rely too heavily on the science of cognitive bias, thinking that it can provide you with the keys to investing success.

The serious research being done by psychologists has been co-opted to offer you yet another tempting short cut – and in successful investing, there is no such thing.

If you’d like to find out more about investing, contact us on Phone: 07 5641 4134.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

How much tax you pay on retirement income depends on your age and the type of income stream.

For most people, an income stream from superannuation will be tax-free from age 60.

How super income streams are taxed

Types of super income streams

Income from super can be an:

• account-based pension — a series of regular payments from your super money

• annuity — a fixed income for the rest of your life or a set period of time

What is taxable and what is tax-free

Part of your super money is taxable, made up of:

• employer contributions

• salary sacrificed contributions

• personal contributions claimed as tax deductions

Part is tax-free, made up of:

• after-tax contributions

• government co-contributions

If you’re age 60 or over

Your entire benefit from a taxed super fund (which most funds are) is tax-free.

If you’re age 55 to 59

Your income payment has two parts:

• taxable — taxed at your marginal tax rate, less a 15% tax offset

• tax-free — you don’t pay anything more

If you’re age 55 or younger

You can usually only access your super if you experience permanent incapacity. If this happens, you’ll be taxed the same as people aged 55 to 59.

If accessing super for a different reason, such as severe financial hardship, your income payment has two parts:

• taxable — taxed at your marginal tax rate

• tax-free — you don’t pay anything more

Use this income tax calculator

Work out your marginal tax rate.

Tax on other types of super funds

Defined benefit super fund

If you’re with a defined benefit super fund, you’ll get a statement from your fund before becoming eligible for your benefit (super money). This will tell you how much of your benefit is taxable and how much is tax-free.

Untaxed super fund

Some government super funds don’t pay regular tax on contributions. These are known as ‘untaxed funds’. If you’re a member of an untaxed fund, you pay tax when you access your money. Check with your fund to find out more.

Self-managed super fund (SMSF)

If you’re part of a self-managed super fund (SMSF), how you access your money depends on the ‘trust deed’ (rules).

Tax on transition to retirement income streams

With a transition to retirement (TTR) income stream, you can access your super while working. To get one of these pensions, you must have reached your preservation age (between 55 and 60).

Use this super and pension age calculator

Find out your preservation age.

You can take out up to 10% of the balance each financial year. You can’t withdraw it as a lump sum.

You pay the same amount of tax as on other super income streams, according to your age. Investment returns on TTR pensions are taxed at up to 15%, the same as a super accumulation fund. 

Tax on non-super income streams

With an annuity bought with money from outside super, you get a fixed income for a set period of time. This pension income, less a deductible amount, is taxed at your marginal tax rate. 

The deductible amount is the part of your original money (capital) coming back to you with each pension payment.

Get help if you need it

Find out more about withdrawing your super and paying tax on the Australian Taxation Office (ATO) website.

Services Australia’s Financial Information Service offers free seminars on topics such as retirement income and pension options.

For information about super contact us on Phone: 07 5641 4134 or speak to your accountant for help with tax matters. 

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/retirement-income/retirement-income-and-tax

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Before you say ‘I do’, talk about your finances with your partner.

Not getting married, but in a relationship? See relationships and money for useful tips.

Manage the wedding whirlwind

The average Australian wedding costs $36,000. According to a Moneysmart survey, 82% of couples dipped into their savings to pay for their wedding. Another 60% got a loan and 18% used their credit card.

Common wedding costs include:

• venue

• food and alcohol

• ceremony and rings

• photography

• entertainment

• clothing and accessories

• flowers

• cars, hair, makeup

• wedding night accommodation

To stay on top of costs:

• Decide what you can comfortably afford to spend and stick to it.

• Break down the costs and work out what you need to spend on each item. Then ask yourself: do I need it? Will it make a difference to the day?

• Do your research and shop around for a better deal — always negotiate.

• Check if you can DIY or get a friend to help with flowers, photography or catering.

• Check online stores. For things like furniture and glassware, you may be better off buying rather than renting, and then on-selling afterwards.

The more you pay up-front, the less likely it is that you’ll get into debt.

Save for your big day

Once you’ve got an idea of how much you can afford to spend on your wedding, work out how much you’ll need to save to pay for it.

The sooner you start and the more you save, the less likely you’ll get into debt.

Use this savings goals calculator

Work out how much you’ll need to save each week in the lead-up to the wedding.

Opening a separate, high-interest savings account or a term deposit is a good way to save. A separate account means you’ll be less tempted to use the money for other things.

For saving tips, see simple ways to save money.

Get on the same (financial) page

Talk about spending habits, debts and financial responsibilities with your partner. Doing this before you get married can help you manage your money day to day.

Also sit down and work out your financial goals. Be clear about what you want and when, so you can work together to get there.

Do a budget (together)

Creating a budget might not sound romantic, but it will give you a clear picture of your regular expenses.

It’s also a great way to help you reach your shared savings goals, including your wedding and honeymoon.

Use this budget planner

Work out your monthly expenses and see where you can save.

Work out how you’ll pay for things

If the two of you have different saving and spending habits, or earn different incomes, work out how to manage your money. Decide whether you want a joint bank account, separate accounts, or both.

Getting a joint bank account can make it easier to share your money and pay bills. However, you’re both responsible for making sure your expenses are covered.

Some people have separate bank accounts rather than a joint account. Then they work out who is responsible for different bills and payments. Or they transfer a set amount each payday into a joint account to cover shared bills.

Every couple is different, so talk to each other about what you think will work best for you.

For more tips, see handling money in a relationship.

Understand the legal changes

Marriage is a legal agreement, so you’ll need to review or update your legal and financial documents.

Update or do your will

Getting married cancels your will (unless your will clearly shows that you were planning the marriage). 

Check your insurance

Update your insurance policies to reflect your new status as a married couple. This is particularly important for life insurance.

Update your super

You may want to change your beneficiary details, and look at how you can grow your super together.

Change your personal details

If you take your spouse’s surname, you’ll need to let the Australian Taxation Office know. You may also need to change it on other documents, such as bank accounts and bills.

Even if you’re not getting married, we can help with other budgeting tips to get your finances on track. Call us on Phone: 07 5641 4134.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/getting-married

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Before you decide to purchase your first property there are a number of things to consider, including your current personal circumstances and financial status.

1. Think about why you want to buy a home

Do you want to live in it or will it be an investment property? This can help determine the kind of loan you apply for and home you buy, depending on your short and long-term plans.

2. Research potential properties and loans

Knowing the market is crucial, so do some research on the areas you are targeting, check out auction clearance rates and recent sales, as well as price trends in the area. Once you are aware of what you are looking for and the approximate price, the next step is saving a deposit.

While some lenders will offer loans if you have saved less than the usual 20 per cent deposit, being able to show a record of good saving habits will aid in getting your loan approved.

Then, when you talk to your local MFAA Approved Finance Broker about applying for pre-approval on the right type of loan, ask for their help to work out what you can afford in terms of repayments.

3. Factor in other costs involved

Depending on the property, there can be a number of additional costs, so ask your finance broker what other payments you will face. This can include, but isn’t limited to, stamp duty, loan establishment fees, legal and conveyance services, utilities, property insurance, maintenance and lenders mortgage insurance.

4. Think about your future

Just because your current situation allows you to get a home loan, that doesn’t automatically guarantee that you will still be able to service it in five years’ time. Is there a possibility your role at work will change? Are you considering going back to study and reducing your working hours?

5. Get professional help

With so many things to consider, getting professional help is highly recommended. There are many experts in the industry and it is in your interest to use them for tasks such as property checks, pest checks and any other legal queries. Going it alone can prove costly, so contact us today on Phone: 07 5641 4134 and we can help you to avoid nasty surprises down the track by getting the right people to do the appropriate checks for you from the beginning. 

Reproduced with the permission of the Mortgage and Finance Association of Australia (MFAA)

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Asset allocation is the biggest determinant of investment returns. Here’s why taking the time to get it right matters.

Choosing investments on a whim based on current market conditions is unlikely to be a winning strategy in the long-run.

What should come first, and what is perhaps fundamentally more important than picking the right investments, is determining your asset allocation. How you divide your portfolio between shares, bonds and cash will have the biggest effect on how your portfolio will perform.

That’s not to say that it has to be an either-or choice between asset allocation or stock picking. Instead, investors should consider both components during portfolio construction and appreciate that asset allocation provides the structural foundations upon which an investment portfolio can be built.

The value of asset allocation

Research found that on average, a portfolio’s underlying asset allocation explained the majority of its return variability over time. Market timing and investment selection on the other hand had relatively little impact on performance.

A carefully considered strategic asset allocation ensures investors are well diversified and building a portfolio that suits their risk tolerance and in turn, better protects them against market volatility.

By first deciding on an asset allocation strategy, investors are able to not only strike the right risk and return balance, but also assess market conditions, diversify and adjust expectations accordingly.

Asset allocation and risk

When it comes to choosing how much money you put into equities, fixed income, property or other assets, investors should first consider their risk profile.

Depending on investment goals, time frame and age, investors are able to choose generally between constructing a conservative, balanced or growth portfolio. A conservative portfolio generally allocates the majority of money to safer havens such as bonds, whereas growth preferences equities.

One way to manage portfolio risk is by selecting assets that have little correlation between them. Equities and bonds for example have close to zero correlation, whereas property and equities are more interlinked.

Equities and equities of course have perfect correlation. So those who see opportunities to capitalise on drops in equity prices over the last few years without considering their overall asset allocation strategy may well have picked up some bargains, but likely to have also ended up with many similar performing shares and little diversification protection.

Sub-asset allocation and home bias

Once the broader asset allocation strategy has been determined, investors can diversify again by turning their attention to sub-asset classes.

A primary way to diversify within asset classes is by selecting a combination of domestic and non-domestic investments. But as research shows, investors consistently display a significant home bias, opting either consciously or subconsciously to favour home-grown securities.

With all the uncertainty currently plaguing global markets, it’s understandable investors may flock to investments that they are most familiar with.

But with the ASX possessing a relatively higher composition of companies in select industries (i.e. banking, natural resources), it may be worth factoring in a reasonable level of global exposure when determining or reassessing your asset allocation.

Conclusion

So just like how each investor will have a unique investment goal, there is also not one standard asset allocation strategy that will suit all.

What should be consistent for all investors however is that asset allocation should inform what investment strategy is implemented. Without it as a guiding light, it becomes all too easy to let emotions affect decision-making, to lean too heavily towards one asset class based on its short-term performance, and to let the current weather blow you off your investment course.

Understanding which asset allocation is best for you is tricky if you don’t know how it works. We are here to help. Contact us if you’d like to find out more about asset allocation and why having a financial adviser can help. Call us on Phone: 07 5641 4134.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Characteristics of impulsive spenders

A ‘money mindset’ is a way of thinking about personal finance. Your money mindset can change over time, and it may help explain your spending and savings habits. Understanding this can help you build habits and strategies to better manage your money.

If the following applies to you, you might be an impulsive spender:

• You find it hard to control yourself when you want to buy something, often dipping into money meant for bills or savings.

• It’s hard to save because you enjoy spending money so much.

• If you won $1,000, you’d spend it on something fun.

• If you needed $2,000 for emergency car repairs, you’d have to borrow money or use a credit card. This would cause you mild financial stress.

• You often feel guilt or regret about your spending habits.

About impulsive spenders

Impulsive spenders enjoy the immediate gratification of spending money, and have difficulty saving for bigger goals. They may find themselves dipping into money meant for savings, or even important bills, to pay for entertainment and luxuries.

They’re unlikely to have long-term financial goals. Their impulsive spending is often driven by a desire to reward themselves, enjoy a special experience or relieve boredom. They often use buy now pay later services.

When impulse shoppers receive a financial windfall, like a tax return or bonus, they tend to spend it on leisure or debt repayments rather than saving it. They often feel guilt or regret when they think about the consequences of their spending.

Control your spending

If you identify as an impulsive spender, you need strategies to help you resist the urge to dip into your savings each time you want to buy something.

Think about ways you can make your money harder to get to. For example:

• Hide your savings account in internet banking so you can’t see the balance when you log in.

• Choose a trusted person and give your credit card to them, or transfer money to their account.

• Open a savings account at a different bank.

• Set up dual signatories so a second person has to sign if you want to withdraw money from your savings.

Use a budget planner calculator to determine how much you can spend and save. Impulsive spenders avoid tracking their expenses because they don’t want to face the reality of their spending. However, this is a good way to see exactly where you’re overspending so you can start cutting back. You can use a spending tool to track your spending. 

When you see a bargain, don’t buy it straight away. Give yourself a few days to think it over first and consider if you really need it. This is especially important right after payday, when you feel cashed up and are more likely to overspend.

If you have a weakness for online shopping, make sure the retailer has a simple returns policy. That way if you regret a purchase, you can send it back.

Make sure you avoid going over your credit card limit. If you’re paying off multiple debts, look into debt consolidation to help you get on top of your repayments.

Set savings goals

Once your spending is under control, it’s time to start building your savings. There are many ways you can do this:

• Put your savings in a term deposit to make them harder to access. The longer you resist withdrawing money from the term deposit, the more interest you’ll earn.

• Set up a savings goal and use an app so you can watch your progress. Choose something you’d like to achieve in the next six months, like a holiday, car or new clothes, and start putting money towards it. Impulse spenders often become goal-driven savers when they focus on a particular savings goal.

• Learn how to bucket your money. Set up different accounts for different purposes, and transfer some money from every paycheck to each account. That way you can spend guilt-free, knowing you already have money set aside for expenses like bills, food and travel.

To take control of your spending – contact us today on Phone: 07 5641 4134

Source: NAB

Reproduced with permission of National Australia Bank (‘NAB’). This article was originally published at https://www.nab.com.au/personal/life-moments/manage-money/money-basics/impulsive-spender

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

© 2022 National Australia Bank Limited (“NAB”). All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

As baby boomers shift into retirement, Australia is on the brink of the nation’s biggest ever intergenerational wealth transfer. Yet estate or inheritance planning is rarely discussed by families.

Talking openly about how you want your assets to be passed on can help avoid family disputes that take a toll both financially and emotionally. It provides a certain peace of mind for you – that your intentions will be met – and for your family and friends.

Certainly the stakes have never been higher, with growing house prices and healthy superannuation balances contributing to a considerable increase in the wealth of many older Australians in the past two decades.

Around $1.5 trillion was transferred in gifts or inheritances between 2002 and 2018. In 2018 alone, some $107 billion dollars was inherited while $14 billion was handed out in gifts.ⁱ

The importance of planning

With so much at stake, having an estate plan in place helps to protect the interests of those you care about and to fulfil your wishes. It takes careful thought and professional advice, but that is no excuse for putting the task aside for later. If something happens to you in the meantime, your assets may not be distributed as you would like and there could be tax implications for your beneficiaries.

An estate plan includes a Will and, in some cases, funeral arrangements and instructions for the care of children and animals. Without a Will, your assets will be distributed according to state inheritance laws which may not be what you intended.

A plan may also include instructions for a testamentary trust to hold assets that are then distributed in a tax-effective way to your beneficiaries. And don’t forget your ‘digital will’, a list of any online accounts and passwords that may be important.

Meanwhile, to protect your interests in case you are incapacitated in some way, an enduring power of attorney and a medical power of attorney nominate the people you would like to handle your affairs until you are better.

Complex families

Estate planning is even more important in the case of blended families or for those with complex family relationships, especially where the emotional issue of the family home is concerned.

Disputes often centre around who gets the house when there are children from a previous marriage, but your new spouse is living in the family home. You could allocate other assets to the children and leave the home to your spouse or require that the house be sold and the proceeds distributed to all. Alternatively, your Will could grant lifetime tenure in the home for your spouse with it passing to your children after your spouse dies. Having conversations early about your intentions, can help alleviate possible conflict.

If you are concerned about protecting the interests of a family member with mental health or addiction issues, a testamentary trust can help to look after your assets and distribute funds in a controlled way. A testamentary trust is also often used to provide for young children, holding the assets until they reach adulthood.

Dividing it up

When it comes to deciding how best to allocate assets among children, some prefer to hand out equal shares no matter their individual financial circumstances, while others prefer to give extra to one who may be struggling. Given that Wills are frequently challenged by family members or others who believe they are owed a share or an even bigger share, it’s wise to make your intentions clear in your Will including reasons and documentation.

While people who receive inheritances are usually well into middle age – on average 50-years-oldⁱⁱ – and perhaps comfortably well-off, you could choose to bypass the next generation. Instead, you might consider leaving your estate to grandchildren, to help set them up with a deposit for a home or covering school fees.

Another option is to begin distributing your estate while you are alive and can share the enjoyment of the benefits the extra financial help might bring.

What’s not covered?

It is important to note that some assets are not covered by your Will. These include assets jointly held with someone else (such as a bank account or a house), super benefits and life insurance.

In the case of jointly held assets, ownership generally passes to the surviving partner and life insurance is paid to the beneficiary named in the policy. For super, it’s vital to complete a binding death benefit nomination to ensure the funds are paid to the person you choose.

With so much to consider, expert advice is critical when preparing an estate plan, so call us on Phone: 07 5641 4134 to begin the discussion.

i https://www.pc.gov.au/research/completed/wealth-transfers

ii Wealth Transfers and their Economic Effects – Commission Research Paper – Productivity Commission (pc.gov.au)

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

How can investors rebalance their portfolio and how often should they do it? Read more to find out.

The target mix of your investment portfolio should be built on your goals, time horizon and risk tolerance. But goals can change, and market fluctuations can cause your asset allocation to shift, so it’s important to monitor your portfolio on a regular basis and make adjustments as needed to ensure you are not taking on more risk than you are comfortable with.

This process is called portfolio rebalancing.

When should investors rebalance?

Most rebalancing strategies consider two types of triggers: time, threshold, or a blend of both.

With a time trigger, the portfolio is rebalanced on a predetermined schedule such as quarterly, semi-annually or annually (but not daily or weekly).

With a threshold trigger, the portfolio is rebalanced only when its asset allocation has drifted from the target by a predetermined percentage, such as 5 or 10 per cent.

How can investors rebalance?

1. Reinvest dividends
Direct dividends and/or capital gains distributions from the asset sector that exceeds its target into one that is underweight.

2. Make additional contributions
Add funds to the asset sector that falls below its target percentage.

3. Transfer funds between asset classes
Shift money out of the asset class that exceeds its target into the other investments.

When you rebalance you need to consider the costs and tax implications. There may also be tax consequences when transferring funds between asset classes. Sometimes it is more tax effective to use new cashflow or distributions rather than transferring assets.

If you have a large portfolio, redirecting cash flow or dividends may not be sufficient to bring your asset allocation back into balance. In such instances, you might have to liquidate investments to rebalance, which may have tax implications.

How often should investors rebalance?

Generally, more frequent rebalancing will ensure tighter tracking to your target asset allocation, but this potentially comes at the cost of lower returns, increased turnover, and a heavier tax burden in the current period. This is why rebalancing should not occur on a daily or weekly basis.

Research has found that there is no specific rebalancing threshold or frequency that consistently outperforms. Rather, an investor’s rebalancing strategy is based on their willingness to accept risk against their expected returns.

Research has also shown that any rebalancing is better than not rebalancing at all. If you are unsure which rebalancing process is right for you, consult a licensed financial adviser who can help tailor rebalancing strategies to your personal situation.

Contact us today on Phone: 07 5641 4134 if you’d like to discuss your current investment portfolio strategy.

Source: Vanguard

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2022 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

We’ve all heard of the dangers of emotional spending but what about emotional saving? Emotions can wield a powerful influence on our personal finances in a positive way, but they can also have a negative impact on where we sit financially. The good news is, by cultivating a bit of self-awareness you can harness your emotions and ensure they help you achieve your financial goals.

Whether your goal is a big one like saving up a deposit to buy your own home, or a more modest splurge to take off on a much needed holiday the best laid plans can be derailed, if you follow your heart rather than your head.

Our decision-making abilities – from those big life changing financial decisions, to the small “treat yourself” purchases – are strongly influenced by how we are feeling at the time. Marketers know that we are not just buying ‘things’ – we buy (or try to buy!) space, love, happiness, freedom… the list goes on.

Developing awareness and discipline

If you find that your spending is influenced by how you are feeling, you are not alone. The most common trigger for overspending is stress, with 29% of people surveyed splashing out in response to stress.ⁱ It’s not just stress causing us to overspend though. In the same survey, sadness was cited by 13% of respondents as a reason for buying up big, with sadness also considered to lead to particularly extravagant purchases.

This so-called “misery is not miserly” phenomenon is backed up by a study where participants who watched a sad video offered to pay nearly four times as much money to buy a water bottle than a group who watched an emotionally neutral video.ⁱⁱ

Getting that warm glow without spending a cent

The best way to counter an emotion led-spending spree is to be aware of how you are feeling and acknowledge that the buzz you get from your purchases is unlikely to last longer than leaving the shopping centre carpark. Think about other things that make you calm and happy that don’t involve spending money, like having a chat with a friend or going for a long walk.

With cost of living increases and interest rate rises putting pressure on household budgets, it’s also a good idea to keep track of your spending and having a set budget with some allocation for the odd splurge will help you put some limits around your spending while not feeling totally deprived.

Keeping emotion out of investing

Negative emotions don’t just cause us to overspend.

Emotions such as envy and greed can drive risk taking behaviours like gambling or investing in ventures where you stand to gain a lot if successful, but could lose the shirt off your back, if the risk does not pay off.

Fear also commonly drives investment decisions but panic selling when the stock market takes a tumble can mean you lock in your losses and lose the benefit of the rebound that inevitably comes over time. Having a plan in place can ensure that you make considered decisions and think through any possible opportunities carefully. Investing is one area where you certainly need to be thinking with your head and not your heart.

Harnessing emotions to help you reach your goals

On the flip side, positive emotions can be a strong motivating force when it comes to personal finances. It has been proven that people save as much as 73% more when they have an emotional connection to their goals.ⁱⁱⁱ

The trick with this is to have something quite tangible that you are hopeful for or excited about, to work towards. Focus on your feelings. Think about how thrilling it will be when you step off the plane and explore your dream destination, or how gratifying it will be to finally pick up the keys and open the door to your new home.

Money is an emotional business and it’s impossible to completely separate your emotions from your finances – after all, we are only human. However, it is worth developing an understanding of how your emotions impact your finances – for worse or for better. Then you can address the things that are having a negative impact and harness those good vibes to achieve your dreams.

If you need to adjust the way you spend your hard-earned money – call us today on Phone: 07 5641 4134. We can put a strategy in place to get you to reach your financial goals sooner.  

i https://www.pnc.com/insights/personal-finance/spend/emotional-spending.html

ii https://abcnews.go.com/Business/story

iii https://s3.amazonaws.com/kajabi-storefronts-production/sites/88071/themes/1463604/downloads/

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.