It may come as a surprise to learn that the biggest regret most people have with their investing is not where they've placed their money. Nor is it the fees they've paid or the types of investments they've made. Instead, the number one regret people have with their investing is that they didn't start sooner.

When we make investment projections for our clients, we often look at what the projected result will be based on a number of years of investment timeframe. For example, if we invested $100,000 for 10 years and received 5% as an annual rate of return over that time, the end result may be around $163,000. Sometimes a client will answer by saying "that's all well and good, I just have to live long enough!" and while this is true, it's not the whole part of the story. The other way to extend your investment timeframe is to begin at an earlier start date rather than wait until all the stars have aligned perfectly.

So how do you start an investment plan earlier in life, particularly when that timing usually lines up with having the most financial commitments? There are certainly a lot of drains on cashflow in the younger years – you may have mortgage repayments, kids to put through school, and simple living costs thrown in on top. It's not always easy to find that little bit "extra" to put towards an investment.

The message we'd like give this week is that you don't necessarily have to start your investing with a large amount, but you do have to start! One practical investment amount for many people is that chunk of money that comes back into circulation after doing a tax return. But for this idea to work, you need to be willing to set that amount aside, rather than bringing it back into circulation for spending. This is generally possible to do, provided you remember you've already been without that money for 12 months and the world hasn't stopped spinning.

Did you know the average tax return figure in Australia is $2,300? So let's see what this can grow to over time:

If you invest your $2,300 and add to it every year with the same amount of tax return income, and you hold that investment for 10 years earning just a 5% rate of return, your lump sum at the end of 10 years is now almost $33,000. If you're a couple and both working and you apply this idea, your investment amount is doubled. This is before assuming that the average tax return figure will likely increase over time. So who wouldn't like a $66,000 lump sum that you've generated from money that you haven't missed in the first place?

Our suggestion is to make a start with your investing and to also make use of the resources available to you to do so. If you've felt hesitant about committing to an investment plan, however small, ask yourself the question "If not you, who? And if not now, when?" And if you've got any questions at all about this or any of our other ideas, please don't hesitate to contact us for help on your personal position.

How Your Values Influence Your Wealth

We spend a lot of time discussing what the best strategies and tips are for growing your wealth position, but one thing we need to get clear on is why you're building or preserving wealth in the first place? This is a really important question - What does money mean to you? What's important to you about money?

When we lift the lid on these issues, we find that everyone has a different position on what they really want from their finances. Depending on your early relationships with money and how you were raised, you may hold "accumulating" as your main priority. This is not uncommon at all, and this mindset assists with creating a sense of security as well as achievement. On the other hand, some people are more disconnected from the idea that money can buy you nice things and therefore happiness.

At Schuh Group, our values around money stem from the understanding that the resource of money gives you choices, but that's as much as it can do for you. It's what you do with those choices that will give you the greatest sense of achievement and eventually contentment.

So to begin this line of thinking, ask yourself what's important to you about money in the first place. If the important things in life for you are family, health and experiences, then money can assist with this and your goals may be centred around providing for your children and family members. On the other hand, if you're interested in the perceived prestige that having money may offer, your goals will be more strongly aligned with making your financial resources work hard for you.

There's not necessarily a right or wrong answer to this as each person is different. We would however encourage you to get clear on what your priorities are, so that your wealth accumulation path can closely align with this. And if you're unsure of your priorities, remember the old saying that "your real interests lie in where you spend your time and where you spend your money." Scroll back through your bank statements and your calendar for some answers.

Why You Must Always Pay Yourself

This week's topic – the importance of paying yourself - can be more complicated than it seems on first glance. Paying ourselves sounds logical, particularly when you're working for a set income paid to you at regular intervals. But the real question comes down to what you actually do with that regular income, and how it's getting utilised.

As we've said in previous weekly episodes, we strongly recommend doing a cashflow budget in order to get really clear on how your money is tracking and what your cost of living is, particularly when it comes to those non-negotiable fixed costs such as bills that we can't get away from. After the budget is completed, it's then time to look at how you're using your surplus cashflow, or the amount that may be left over after your bills are paid. This is also related to how you've arranged your personal bank accounts. 

An easy way to organize your accounts is to have the following arrangement, or something similar:

1. A bills and everyday account

2. A personal spending account

3. Online savings accounts for different purposes (such as travel, school fees etc)

4. Investments and superannuation

The amount that gets directed into each of these accounts really depends on your cashflow surplus, but the most important aspect is that some money is diverted out of circulation from the everyday account, and into other areas. It's also best if this arrangement is done automatically so you get used to only using what's in the everyday account for your regular expenses.

In the case of a couple, it's best if each person has their own personal spending account and they have full discretion over what they spend that money on. This way, there are no arguments over who spent what – if you want that pair of shoes, you can buy them with no guilt, provided there's money in your personal spending account to cover them.

And of course, you should certainly make an effort to pay some money into an investment account as well as your superannuation. Salary sacrificing into super is a great and simple way to do this, and it has the added benefit of saving you some tax in the process.

Paying money into super is particularly important if you're self-employed – don't overlook this! You pay your employees superannuation and it's just as important to pay yourself on a regular basis. Fast forward 10 years and you'll certainly be pleased you put some money aside.

For business owners, it's an easy trap to fall into to not pay yourself a correct wage or to simply not pay yourself at all. The downside of this approach is that you're really running your business as though you've "bought yourself a job." By not paying yourself a regular wage, you avoid having to make a higher profit amount, but you also reduce the end value of your business in the eyes of a potential buyer.

Consider if someone came along and wanted to buy your business – one of their questions may be whether the business could, in fact, be run by a manager. If there's not enough room for the owner to draw an income, there won't be enough room for the expense of a manager to be covered either. This has the effect of then reducing the overall value of your business asset. Therefore, challenge yourself to draw a regular wage from the business and aim to have the capacity to increase this over time.

If you'd like to know more about this concept please don't hesitate to contact us. We're only a phone call or email away.

The Latest Legislative Changes for Business

If you're in business or find yourself in a decision making role in someone else's business, then this week's content is for you. There's an old saying that "the more things change, the more they stay the same," and while that's partly true, there are some important changes that have come into play for businesses with the beginning of the new financial year. Here are a few that may be having an impact on you and are worth knowing.

National Minimum Wages Increase
From 1 July 2018, the national minimum wage has increased in Australia by 3.5% - the new national minimum wage is $719.20 per week, for a 38-hour week, or $18.93 per hour. The increase applies from the first full pay period starting on or after 1 July 2018, for employees on the national minimum wage or a modern award. So, if you're paying your employees minimum award rates, you need to have made an adjustment upwards.

Single Touch Payroll
From 1 July 2018, the Australian Taxation Office (ATO) has introduced the Single Touch Payroll (STP). If you employ 20 or more employees, you will need to report to the ATO each time you pay your employees. The information you need to send to the ATO includes your employees' salaries and wages, allowances, deductions (for example, workplace giving) and other payments, pay as you go (PAYG) withholding and superannuation.

Updates to the National Privacy Act – Data Breach Changes
From 22 February 2018, businesses with an annual turnover of more than $3 million are required to comply with the Notifiable Data Breaches scheme under the Privacy Act 1988. A data breach occurs when unauthorized personal information is accessed or released. If the breach is likely to cause serious harm to an individual, businesses are obligated to notify both the individual involved, and the Office of Australian Information Commissioner (OAIC).

Changes to Gift Card Expiry Dates and Fees for NSW
And finally some good news for shoppers! You may like to buy your gift cards when you're visiting NSW in future, as gift cards and gift vouchers purchased in NSW will have a three-year expiry date as of 31 March 2018. NSW businesses that issue gift cards or gift vouchers will need to honour the purchase if it's within that period. Businesses issuing gift cards or gift vouchers prior to this date are not affected by the changes. We're not actually sure whether those gift cards can be used interstate with the same three-year conditions, but it's worth a try!

If any of the above changes affect your business and you'd like to know more, please don't hesitate to contact us. We're only a phone call or email away.
Anyone who has spoken to their parents or grandparents about the cost of living will be familiar with the idea that the relative value of money has changed over time. Most people are aware that prices for the same object gradually increase, although we often only hear about how this affects the property market. Unfortunately, the cost of living also goes up over time, and this is what inflation does. The value of a dollar today is not worth what it was last year, and this difference increases over time.

To put this in perspective, we need to keep in mind the concept of "real rate of return." This refers to what your investments are really returning for you over time, once inflation has been taken into consideration.

To use a real example, let's look at the history of the Australian share market versus inflation. For the past 30 years, the Australian share market has given an annual return of 8.4%, meaning that a $10,000 investment made 30 years ago would have grown to be worth $113,405 today. By comparison, the rate of inflation we've had over that time has been 3.0%. For investors, the real "take home return" you've had over that time is the difference between the two measures being 5.4%, or that same $10,000 has really grown to $89,374.

So what does this really mean for investors? The only way to reduce the negative impact of inflation is to place a portion of your total investment amount in assets that will also go up in value over time, such as through shares and property. Investing in cash and term deposits, unfortunately, doesn't fit this bill, as the return to the investor only comes from income (interest). To again use the 30-year figures to illustrate this, if an investor placed that same $10,000 investment in cash 30 years ago, the return would have been 6.4% or an increase to $65,127. However, this drops to just 3.4% or $41,096 once inflation is taken into account.

Hopefully, this illustration confirms why the savvy investor needs to take into consideration the negative effects of inflation on real returns. The best way to combat this is to include some exposure to shares and property in your overall mix of assets. Inflation is the "silent killer" of long-term results, so set your allocations right in order to reduce the impact on your overall outcomes.

How to Grow a Wealth Mindset

For those who are interested in building your knowledge level around wealth, this week's post is for you! Here at Schuh Group, we encourage you to become as educated as possible in the field of investing and money management. Some of this can be achieved through talking to those who are "in the know" while some information is best delivered by books and publications.

This week we'll be sharing our recommendations on which books will help you grow your wealth mindset and give you the best value for your time.

1. The Barefoot Investor, by Scott Pape

This book is a great place to start. It outlines a number of "money fundamentals" that may seem basic at first but are incredibly important habits to put in place. It's no accident that people who accumulate significant amounts over time generally spend less than what they earn, and invest the surplus in solid investments.

2. The Little Book of Common Sense Investing, by John C. Bogle

For a no-nonsense overview of the pros and cons of the sharemarket, this book has stood the test of time. It outlines why investing for the long term in a broad mix of assets and at a low cost is undoubtedly the best approach to take.

3. The Investment Answer, by Daniel C. Goldie and Gordon S. Murray

If you only read one book on investing in the share market, make it this one! The Investment Answer dispels the long-held myths about investment "out performance" and gives the reader statistical historical evidence on why a broad asset class investment mix is the best way to go.

4. Think and Grow Rich, by Napoleon Hill

When it comes to cultivating a wealth mindset, there are few better books than this tried and tested publication by Napoleon Hill. Think and Grow Rich gives you a guide on how to visualize increasing your wealth, and then how to methodically go about achieving that.

If you'd like to discuss any of these books in more detail, please contact our office. Happy reading from the Schuh group Team.

Happy New Financial Year!

This week we wanted to take a pause and ask you what does the new financial year mean for you?

For some, you may have just let out a big sigh of relief having gotten through the last one without any problems and are just happy that now you can leave it again until around April or May next year as the deadlines loom again. Or maybe you are thinking, no, this year I am going to keep on top of it all and start looking at some strategies now that can help me create wealth and keep on top of it all. The truth is that the right strategy is whatever works for you, your business and your goals.

Wealth and money are subjects that are personal for each of us. For some it may be about financial wealth, starting a portfolio, contributing more to super for retirement or looking at some ways to try and minimise tax. For others it may be more holistic, looking at all of these financial areas in conjunction with lifestyle goals and aspirations for the future and combining a long-term strategy with short-term objectives.

No matter what it all means to you, right now, the first week of the financial year is a great time to sit and reflect on your goals and strategies for the coming year. Over the coming weeks and months, we will be sharing a number of strategies with you to support you to continue to grow and prosper in life and business.

And our first tip this week – do your tax return early!

Start this financial year on the right foot and book in now to get your tax return complete. This will ensure that you are able to gather all the information your accountant may need before tax deadlines loom and if you are due to get a return then the money is better sitting in your pocket working for you. 

If you are ready to book in now or want to discuss any other financial worries, please contact us via email or just give us a call on 54822855.

The Wonderful World of the Share Market

Following on from last week, we'd like to take a dive into the wonderful world of the share market – a place that seems to give investors both good and bad sensations. 

Once you understand that buying shares is the same as becoming a part owner of a company, it's somewhat easier to understand how prices can move up and down each day. This is a reflection of what all the participants in the market feel a particular company is worth at any one moment, based on the knowledge they have at that time. There are different approaches you can take to investing in shares. Some people prefer to actively trade their share investments on a regular basis, sometimes multiple times per day. Others will take a longer-term position and buy into an investment in the belief that returns will gradually go up over time.

Our preferred investment approach is to hold a very large spread of shares and to access these shares at a low cost. We also feel it's best to only enter the share market if you can afford to buy into these investments and hold them for at least 5 years. This is to allow for the natural market movement an investor will experience over that time. We also know that history rewards those who are patient and disciplined in their investment approach. Below is the returns history of our Australian share market over the last 118 years. At an average return of 13.2% per year, making a long-term investment in the share market certainly makes a lot of sense.

If you'd like to discuss your investment options more with us, just remember we're only a phone call or an email away.

What's Your Investment Type?

What better way to finish off the financial year than with some consideration about investments? This week we'd like to broadly discuss the different types of asset classes and how these may or may not be right for you, depending on your circumstances and preferences.

Investment Types
Broadly speaking, there are four main types of investments available to everyone. These include:
1. Cash: money in the bank, savings accounts, and term deposits.
Pros: There's a lot of certainty around having money in the back. It's easily accessible and doesn't drop in capital value. This is a low-risk investment.
Cons: This type of investment also has low long-term returns, particularly in the current low rate environment. Cash also doesn't protect against inflation as there is no underlying capital growth unless you physically add more to it.

2.  Interest: Government or semi-government bonds, or corporate bonds. These investments are issued by these organisations in an attempt to raise funds and with the promise of a fixed return to the investor.
Pros: This is still considered a "safe" investment but it generally offers a better return than straight cash investments. Long-term averages have fixed interest returns sitting at around 2% higher than cash.
Cons: Bonds can be traded on the bond exchange, meaning they can drop in capital value. Risks are also associated with lower grade bonds, meaning the issuing source may have difficulty in paying you back your initial investment amount.

3. Property: This class of asset includes residential properties, commercial or industrial premises, vacant land, and listed property companies.
Pros: We and see it and touch it! The property also gives you returns from two areas, both capital growth in the value of the property as well as some income by way of rent. These returns are generally higher than both cash and fixed interest. You can also use your equity in properties to borrow against.
Cons: Property values can drop and stay down for some time. There are also high transaction costs in buying and selling these, namely from stamp duty, capital gains tax and agent fees. Property can also often take some time to sell.

4. Shares: An ownership stake in a company is purchased by an investor, allowing them to share in the growth of that company as well as a portion of the profits, by way of dividends.?
Pros: This asset class gives the highest long-term rate of return, slightly edging out property. It's easy and cheap to sell shares if you need money quickly, and it's also simple to spread your share investment out, thereby reducing your risk. As an investor, you also generally receive your returns from two areas – growth and income.
Cons: Shares move up and down on a daily basis, thanks to the daily nature of the share market. They can drop in value quickly and take some time to return to previous highs. Because of the ease of buying and selling shares, some investors panic and sell when markets are down, thus crystallising their loss at the wrong time.

So, which one of these is right for you? For most people, the best investment strategy is to have a mix of all of the above. If your wealth accumulation is your goal, then having a focus on shares and property will be your best overall strategy. But if you can't stand the possible up-and-down movements of this type of investment, head towards the smoother ride from cash and bonds. Just remember, risk and return are related, and relatively good long-term returns can't be achieved without taking on some risk with your investments.

If you'd like to discuss your investment options more with us, just remember we're only a phone call or an email away.

Investing 101 - Making Sense of Investment Terms

When it comes to investing, it can be a minefield for both the amateur investor and the professional alike. But one point to remember is that not all investments are created equal, and those that suit you the best may depend on your stage in life, and how comfortable you are in taking on risk.

Here are a few fundamentals to consider:

1. Assets can be divided between roughly two categories: "defensive" and "growth".
The defensive side of things provides a buffer for you and has less volatility (up and down movement) and is generally associated with investments such as cash, term deposits and bonds. This is the safe stuff and has a lower associated risk, as well as a lower return. The "growth" side of things is made up of property, Australian and international shares, and commodities. The return from these types of assets generally comes from two areas – the increase in the value of the investment as well as the income they generate through dividends or rent.

2. Risk and return are related
Evidence from investors and academics points to one undeniable conclusion: returns come from risk. Investment rewards are rarely accomplished without taking a risk, but not all risks carry a reliable reward. Everything we have learned about expected returns in the share markets can be summarised in three dimensions:

a) Shares are riskier than bonds. In turn, they offer higher expected returns as a reward.
b) Small companies have higher expected returns than large companies. This makes sense because small companies are more of an unknown quantity.
c) Lower priced 'value' shares offer higher expected returns than higher priced 'growth' shares. A value share is one that is out of favour for one reason or another. The level of exposure to these areas will determine the risk and reward for an investor.

3. Diversification reduces investment risk
Investing without diversification is exposing yourself to unnecessary risk. Avoidable risks are holding too few shares, speculating on specific industry sectors or countries and following the predictions of others. These are risks that don't provide a reliable reward.

By spreading your investments across different types of asset classes you can build a total portfolio for all conditions. This is because while one asset class is performing poorly, another may be doing well. This is not to say diversification is complete protection, but it is insulation to reduce volatility. We hope you have found some useful tips in this week's "Money in Life" series. Remember not to leave these items to the last minute and also know that we're only an email or phone call away if you would like to seek advice on any of the above.

Much has been going on in the background with the Banking Royal Commission of late, and we feel it would be timely to comment on how this relates to your superannuation funds. As we've mentioned in previous weeks, we're big fans of the wealth accumulation benefits that the superannuation system offers, mainly through tax savings on both contributions and the underlying investments your super holds.

What we're not a fan of is the vertical integration system that many institutional super funds have been using for years, and the negative impact this has had on some people's superannuation fund balances. Sadly, we have witnessed several devastating occurrences when assisting and representing clients who have previously been serviced by the bank and institutional financial planners.

Many (but not all), of the problems highlighted, have stemmed from the vertical integration model that exists within the major banks and institutions. They employ the advisers whom the clients deal with. They own the platforms that host the clients' money. They own and manage the funds where the clients' money is invested. The conflict of interest is immediately apparent. The adviser will inevitably be incentivised to keep a client's money within the corporate structure. As an ASIC report from earlier this year found:

While the big institutions' approved product lists were made up of 21% of in-house products and 79% of external products, when a client's money was invested, 68% of the time it went to their in-house products.

And what happens when the bank or institution is placed before a client? Only 25% of the advice given by the big institutions was considered to be compliant by ASIC. 65% was considered non-compliant, with 10% considered non-compliant with significant concerns. The issue of non-compliance partially stemmed from recommending new financial products when there was no demonstration that a client would be better off.

So how does this relate to your superannuation and why does it matter? When most Australians reach retirement, superannuation is the biggest asset they have alongside their house. It's also the most accessible when it comes to funding income in the retirement years. This means that the more you have in super the better, and you also get a benefit from a higher performance, relative to the risk of the investments.

So what should you do about your super in light of what we're learning from the royal commission?

1. Ask for a second opinion on your fund if you don't know how to look up the fees and performance data or what this actually means for you.
2. Get clear on the type of fund that will work best for you. This might be a basic industry fund, a retail fund with more flexibility, or a Self Managed Super Fund, depending on your goals.
3. Review your super regularly against a reputable benchmark. This is not a set-and-forget asset for you, so make sure you're receiving what you're entitled to.

As always, if you are unclear about your position in relation to your super, make it a priority to seek professional advice. The laws around super are extremely tight, and at best, there are serious penalties for non-compliance, at worst you could well be leaving yourself in a worse financial position during your retirement years.

Choosing the Best Super Fund for You

We talk about Super a lot when it comes to tax planning and wealth creation, but you certainly want to make sure you've got the right vehicle for the job. If you get the selection right, you'll have many happy years of investment returns ticking away in the background. 

If, on the other hand, you get it wrong, you'll literally see thousands of dollars pass you by over the lifetime of your fund. Here are a few things you need to be aware of:

1. Understand the different types of funds available. These fall into three broad categories:
Industry Super funds (including government funds) - In a nutshell, Industry Super Funds are generally lower cost options with a reasonable amount of investment choice. They would appeal to the investor who has a low level of complexity, doesn't what much involvement with their super, and is after lower fees. Where these types of funds won't suit is if your situation is more complex, or if you're wanting a higher degree of control and transparency over the underlying investments you're holding. Our opinion is that these funds are ok for many people in the accumulation phase, but they are less than optimal when it comes to drawing a pension.

Retail super funds - Retail Super Funds come with a higher level of control as well as transparency, meaning you can see what you're invested in most of the time. These funds are often administered through a specific super fund company, many of which are owned by banks or investment companies. This type of fund would appeal to those who like more involvement with their super funds, but who don't need the complexity of an SMSF. The fees can sometimes be higher than an industry fund, so the returns also need to be higher for this to be the best option.

Self Managed Super Funds (SMSF's) - An SMSF is the most complex type of super fund available but they still operate under exactly the same super legislation as the other fund options. The pros of this fund are ultimate control and transparency as well as some additional investment options (such as investment properties).
The cons come in the form of annual tax returns and audits that need to be completed, as well as a possible time commitment to managing the fund. We'd suggest a starting balance of at least $200,000 to make this option worthwhile.

2. Look at the investment options, fees, and performance
When it comes to investment options, these will vary greatly depending on the type of fund you have. But take the time to research what's available and most importantly, consider the asset allocation of your investments. If you're still a long way from being able to access your super, make use of a higher risk option so you can get your returns up over time. Also look at the fees you're being charged and consider if these are value for money. You'll likely encounter administration fees and investment fees, but the ones you really want to avoid are contribution fees or performance fees – these are a gouge. There's also a lot of information online about the relative performance of your super investments and it certainly pays to check this out. If you're after a comparison as to what your fund should have earned, just let us know and we can provide this.

3. Insurances – don't forget these
Lastly, don't forget your insurances. You may automatically have some of these issued in a super fund and many of these insurances are quite a low cost. Weigh up what you think you might need versus what you have in your super funds before you go and change funds quickly – you may just lose the cheapest insurance you had by doing so.

This is a short summary of some considerations for your super funds, but please let us know if you need help in this area. Super is a vital part of your wealth creation journey and it pays to get it right.

Can You Make Super & Tax Work Better Together?

If you've been reading our blogs for a little while now, you may have picked up on the fact that we're big fans of superannuation. Yes, the Government keeps fiddling with it and yes, you have to wait a long time to get at it. But despite these downsides, superannuation is still the best tax haven we've got for long-term investing. For this week's update, we're giving you a little bit of background on the very close relationship between your superannuation and how it's taxed.

As explained on the Moneysmart website, everything you need to know about Super and Tax is as follows:

1. How Super Contributions are taxed
The amount of tax you'll pay on your super contributions depends on the type of contribution and your personal circumstances.

2. Employer and salary sacrificed contributions
Also known as concessional contributions, employer and salary sacrificed super contributions are taxed at 15% when they are received by your super fund. The current limit on this type of contribution is $25,000 per year.

3. Personal contributions
After-tax personal contributions and those received by the fund from the money you're deemed to have already paid tax on and are therefore not taxed when they are put into your super fund. The current annual limit on this type of contribution is $100,000 in most cases.

4. How Investment Earnings are taxed
Income which is earned in the fund (investment earnings) is taxed at a maximum rate of 15%. Capital gains on assets held for longer than 12 months within the fund will be taxed at 10%. The amount of tax your fund pays can be reduced by tax deductions or tax credits. For example, a growth fund may only pay an average of 7% tax because its dividend income entitles it to tax credits.

5. How Super Withdrawals are taxed
It may feel like you've had to wait a long time, but there are certainly some tax benefits when it comes to finally accessing your super. When you become eligible to access your super you can take a super income stream to provide you with a regular income, or you can withdraw all or part of your benefit as a lump sum.

6. Super income streams
The tax treatment of super income streams depends on whether you're over or under age 60, still working or permanently retired. If you are aged 60 or over your income will usually be tax-free. If you are under age 60 you may pay tax on your super pension.

7. Lump sum withdrawals
If you are aged 60 or over any withdrawals from a taxed super fund are tax-free. Different rates may apply to untaxed funds, such as government super funds. If you access your super before age 60 you may pay tax on withdrawals. You can withdraw up to the low rate threshold, currently $200,000, tax-free. This is a lifetime limit and is indexed annually. The threshold does not include the tax-free portion of your super account, which will be returned to you tax-free. Any amounts over the low rate threshold will be taxed at 17% (including Medicare Levy) or your marginal tax rate, whichever is lower.

As you can see from the above outline, there's quite a bit of consideration that needs to go into accessing your super. For this reason, we suggest getting us involved if you have any questions on this or other topics, we're only an email or phone call away.

Tips to Minimise Your Tax Ahead of EOFY

Now that the end of financial year is just around the corner, it's time to put some real focus into your tax minimisation strategies. For many of us, living with the benefits we have in Australia does mean that we have to pay a portion of our earnings in tax, but no one wants to pay more than their fair share. Listed below are some ideas for you to implement, but just make sure you've got them covered before June 30.

1. Pay and delay if you can
Now is a perfect opportunity to pre-pay some expenses that you'll likely carry through with you into the next financial year. For example, see if you can pay for subscriptions, the cost of your income protection policy, conferences and membership fees all before June 30. Also, ask your lender if you're able to pre-pay any of your interest for the next financial year. Then if the opportunity arises, see if you can put off receiving income before the June 30 deadline. This might be achieved by holding off on issuing invoices or even reviewing your term deposit maturity dates.

2. Reduce capital gains
If you're sitting on capital losses on some of your smaller share investments and you don't have a long-term plan to continue holding these, it may be a good time to sell these shares and use the losses to offset against any gains you've made earlier in the year.

3. Top up your super and salary sacrifice
Topping up your super can be one of the best deductions around, as you're still the holder of the money, minus the 15% contribution tax. This is different to claiming a deduction on paying bank interest as once that expense is paid, the bank has the money rather than you. Concessional contributions are allowed for up to $25,000 per person under 75, so make use of these limits. For a couple, that's up to $50,000 between them that can be set aside to accumulate in a lower tax environment. Don't forget that if your employer is making contributions for you, you're only able to salary sacrifice by the difference to take you up to the $25,000 limit.

4. Small business immediate asset write off up to $20,000
If you're a small business, this is definitely something you want to make use of although this allowance has now been extended to 30 June 2019. If you buy an asset and it costs less than $20,000, you can immediately deduct the business portion in your tax return. You are eligible to use simplified depreciation rules and claim the immediate deduction for the business portion of each asset (new or second hand) costing less than $20,000 if you have a turnover less than $10 million (increased from $2 million on 1 July 2016), and the asset was first used or installed ready for use in the income year you are claiming it in.

5. Charitable gifts
If you're thinking of making a charitable donation it's best to do so before June 30 as you'll most likely be able to claim the full donation amount. 

Remember not to leave these items to the last minute and also know that we're only an email or phone call away if you would like to seek advice on any of the above.

The 2018 Federal Budget. Making Sense of it All

The Federal Treasurer, the Hon. Scott Morrison MP delivered his third Federal Budget on 8 May 2018. Income tax cuts will be delivered over a six-year period, through a combination of tax rate threshold changes and tax offsets. With regard to superannuation, the maximum number of members in a self-managed superannuation fund will increase, and those with good record-keeping and compliance history may move to a three-yearly audit cycle. The work test for certain individuals aged 65-74 will be removed, and certain longevity retirement income products may be more concessionally treated under the age pension means testing than originally proposed.

This Summary Provides Coverage of the Key Issues in Relation to You:

1. Personal income tax - A number of changes have been proposed to reduce personal income tax on a staggered basis over a six-year period from 1 July 2018.

Increase in tax bracket thresholds

The 32.5 per cent upper threshold will be increased from $87,000 to $90,000 from 1 July 2018. This reduces the tax liability of those earning $90,000 or more by $135. A further increase in this threshold to $120,000 is proposed from 1 July 2022. In addition, the 19 per cent upper threshold will increase from $37,000 to $41,000 from 1 July 2022. From 1 July 2024, the Government will extend the top threshold of the 32.5 per cent personal income tax bracket from $120,000 to $200,000, to recognise inflation and wage growth impacts. Taxpayers will pay the top marginal tax rate of 45 per cent from taxable incomes exceeding $200,000 and the 32.5 per cent tax bracket will apply to taxable incomes of $41,001 to $200,000.

Denying deductions for vacant land

Expenses associated with holding vacant land will cease to be deductible from 1 July 2019 and will not be able to be carried forward. Such expenses for land that was previously vacant will only become deductible when construction is complete, approval for occupancy has been granted and the property is available for rent, or the land is used in carrying on a business.

Ensuring tax compliance for individuals
Additional funding will be provided to the ATO to assist its compliance activities around taxpayers that over-claim deductions or entitlements.
The funding will complement and strengthen the ATO's data matching and pre-filling activities.

Improving the taxation of testamentary trusts
Current rules allow minors to be taxed as adults in respect of income paid on assets or cash proceeds held within a testamentary trust. This new measure, commencing on 1 July 2019, will ensure that minors are taxed in a manner consistent with other income earned and prevent assets being placed into a testamentary trust that were not related to the deceased estate.

2. Business owners
Economy-wide cash payment limit of $10,000
From 1 July 2019, any payments for goods or services to businesses that exceed $10,000 will no longer be allowed to be paid with cash. They can only be paid electronically or via cheque.
Transactions with financial institutions and consumer to consumer (non-business) transactions will not be subject to this cash limit.

Extension of the immediate deduction for business assets purchased under $20,000
This will extend for a further 12 months through to 30 June 2019

3. Superannuation
SMSF member limit increase
The maximum number of members allowable in self-managed superannuation funds (SMSFs) and small APRA funds will increase from four to six from 1 July 2019.

SMSF three-yearly audit cycle
SMSFs with a good record-keeping and compliance history will move from an annual audit to a three-yearly audit from 1 July 2019. To qualify the SMSF will be required to have three consecutive clear audit reports and lodged their annual returns on time.

Work test exemption for those with balances of less than $300,000
From 1 July 2019 those aged 65 to 74 with a total superannuation balance of less than $300,000 will be eligible to make voluntary contributions in the financial year following the year they last met the work test. Eligibility will be assessed based on the individual's total superannuation balances at the beginning of the financial year following the year that they last met the work test.
Individuals with multiple employers able to opt out of Superannuation Guarantee. Individuals who earn over $263,157 from multiple employers will be able to nominate that their wages from certain employers are not subject to the Superannuation Guarantee (SG) from 1 July 2018. This will allow eligible individuals to avoid unintentionally breaching the concessional contributions cap as a result of receiving SG contributions from multiple employers. Employees who use this measure could negotiate to receive additional income, taxed at marginal tax rates.

Opt-in basis for default insurance inside superannuation
The Government proposes to amend the default insurance arrangement in superannuation funds, which currently requires members to opt-out of cover, to be on an opt-in basis. This change will apply to members with a balance of less than $6,000, under the age of 25 years, or whose account has been inactive (ie hasn't received a contribution) for 13 months or more. The changes are proposed to take affect from 1 July 2019. A transition period of 14 months will allow affected members to decide whether or not to opt-in. The Government will also consult publicly on how to balance retirement savings objectives and insurance cover inside super.

Passive fees, exit fees and inactive super
From 1 July 2019, a three per cent annual cap on passive fees will apply to superannuation accounts where the balance is below $6,000. In addition, exit fees will be banned on all superannuation accounts. Superannuation funds will also be required to transfer inactive accounts (ie that have not received a contribution for at least 13 months) with a balance of less than $6,000 to the ATO. The ATO will proactively reunite inactive accounts with active accounts where the value of the consolidated account will be at least $6,000.

Requiring superannuation fund trustees to offer CIPRs
The Government will introduce a retirement income covenant into the Superannuation Industry (Supervision) Act 1993 that requires trustees to develop a strategy that would help members achieve their retirement income objectives. The covenant will require trustees to offer CIPRs which provide individuals with income for life. The Government will be releasing a position paper for consultation on this measure shortly.

4. Social Security
Expansion of the Pension Loan Scheme
From 1 July 2019 all Australians of age pension age will be eligible, including full rate age pensioners (currently excluded from the scheme). The maximum loan amount will increase from 100 per cent to 150 per cent of age pension. The loan is paid fortnightly, is tax-free and currently attracts compound interest of 5.25 per cent on the outstanding balance.

Extension of the Pension Work Bonus
From 1 July 2019 the bonus will increase from $250 to $300 per fortnight. This means that the first $300 of income from work each fortnight will not count towards the pension income test.
Eligibility will be extended to the self-employed, subject to a 'personal exertion' test, reflecting the intention that the bonus not apply to investment income. 

New means testing rules for lifetime retirement income products
From 1 July 2019 a fixed 60 per cent of all pooled lifetime product payments will be assessed as income. Sixty per cent of the purchase price of the product will be assessed as assets until age 84, or a minimum of 5 years, and then 30 per cent for the rest of the person's life.

5. Aged care
Improving access to residential and home care
The Government will provide additional funding to deliver a package of measures to improve access to aged care for older Australians. The More Choices for a Longer Life package includes 14,000 new high level home care packages over four years from 2018/19 and 13,500 residential aged care places in 2018/19.

Why We Needed the Royal Commission Shake Up

The headlines coming out of the current Banking Royal Commission are a tragic and timely reminder that bad advice can have enormous consequences. It is important to us that you have a clear understanding of what it all means, so we will be giving an explanation as to what some of the problems are with the banking and big insurance company's current advice structures in order for you to make informed decisions.

If you go to a bank or insurance company for financial advice, the reality is that the person providing you with financial advice is employed by the institutions that also have a direct financial interest in you taking out one of their products. This problem of "vertical integration" is a relatively new phenomenon. The early 2000s saw an explosion in corporate deal-making as investment banks reaped handsome fees from their less flashy cousins by advising Australian domestic banks to go on a buying spree of wealth management companies. It was at the time when, Australia's now $1.6 trillion superannuation honey pot was just beginning to flourish, and the banks and AMP thought they'd better get a piece of the action. Fast forward to today and we now have over 85% of the financial planning industry in Australia owned either directly or indirectly by the big four banks and AMP.

Consider this – if you went into a Commonwealth Bank branch and asked to see a financial planner, it's highly unlikely that this financial planner would recommend you put your superannuation with a Westpac super fund, or take out personal insurance with an ANZ policy. Instead, they'll try to sell you the Commonwealth bank super and insurance products and while it may be understandable, it's not necessarily in your best interests.

For this exact reason, the financial planning arm of Schuh Group has always been a non-aligned advice offering, meaning we're in no way tied to the big four banks or AMP. This means we're able to give you completely unbiased advice that's in your best interests, and while we may sometimes recommend a bank owned product, at other times we may not – it just depends on your situation and what's right for you. And this is key.

When it comes to financial advice much like anything else in life, there is no one size fits all solution. The right plan and structure for you and your family will depend on your personal goals, your current circumstances, earning capability and risk level analysis. The role of a financial planner is to support you to clarify your goals and find suitable sustainable solutions to help you realise them. Yes, as a financial adviser there is a return from the products you choose, however, the return we make is only as good as the returns you receive. An independent advisor understands that having clients in a long-term sustainable solution with positive returns is the right path to success. This is not to say that a bank employed financial planner is not aiming for the same outcome, it just means that their portfolio of solutions is limited to the products that their bank or institution offers.

It will be interesting to see what happens to the banking landscape in times ahead, as their advice arms seem to be unravelling of their own accord. This may not necessarily be a bad thing though, provided it doesn't leave customers any worse off during the process and it forces all advisers to provide the best advice possible.

If you'd like a second opinion on any of your bank-owned products, please don't hesitate to ask. We'll compare these to the other products available and give you an unbiased opinion on what's right for you and your situation. 

Our vested interest is seeing your wealth grow over time, not to line the pockets of the bankers. Call us today on 5482 855.

First Quarter Review for 2018

Global economic data remained encouraging during Q1, though after a long period of relative calm and upward movement volatility again reared its head in equity markets. While towards the end of the quarter the potential for trade wars heated up. In the US, economic data continued to be supportive. US business confidence reached a multi-decade high in March. GDP for Q4 2017 was revised upwards to show growth of 2.9%, and while industrial activity slowed – as measured by the ISM manufacturing index – it continued to indicate expansion.

The US Federal Reserve raised rates by 25 basis points in March, from 1.5% to 1.75%. It did not, however, alter its overall rate projection of three hikes for 2018. This announcement quelled some concerns, but escalating US-China trade sanctions precipitated a renewed bout of turbulence in March.

In the eurozone, GDP growth for Q4 2017 was confirmed at 0.6% quarter-on-quarter and unemployment stable at 8.6% in January 2018. However, forward-looking surveys painted a picture of slower growth. The composite purchasing managers' index (PMI) hit a 14-month low in March and annual inflation was 1.1% in February, below the European Central Bank's (ECB) target. ECB chairman Mario Draghi noted interest rates would not rise until the end of the quantitative easing program.

While UK economic growth remained sluggish, in its February inflation report the Bank of England nudged up its growth forecast for 2018, from 1.7% to 1.8%. There was further progress with Brexit negotiations, with an initial agreement struck on the terms of a transition period for after the UK formally exits the EU.

The Japanese economy experienced a soft patch in Q1 2018 with many indicators of production and consumption slightly slipping. The most pervasive influence came from the switch in US policy towards increased protectionism. Investors were also taken by surprise by a sudden change in stance of players engaged in discussions on North Korea's nuclear ambitions.
In Australia, the Reserve Bank left its own benchmark cash rate unchanged for a record equalling 18th consecutive meeting at 1.5%, pointing to strengthening economic growth alongside continued low inflation.

The Bloomberg Commodities index turned negative in Q1. Weakness came from industrial metals amid global trade tensions. While copper was particularly weak, down 8.3%, energy again recorded solid gains. Brent crude continued to rally amid confidence OPEC would maintain production cuts throughout 2018.

And The Overview for Australia

Asset Class Returns; the following outlines the returns across the various asset classes to the 31st March 2018.

It was a mixed first quarter for global equity markets in 2018, with an upsurge in volatility from the very low levels of 2017 a major talking point.

US equities began 2018 strongly, buoyed by ongoing strength in economic data, robust earnings and the confirmation of a major tax reform package. However, the latter part of the quarter saw a marked increase in volatility. Investors first digested the destabilising potential of an elevated US inflation reading and the possibility that the Federal Reserve (Fed) may need to become more proactive in raising interest rates in order to keep upward price pressures under control.

Eurozone equities delivered negative returns in the first quarter, with the bulk of the declines coming in March. Markets began the year on a firmer footing but worries about the path of US interest rates and the outlook for global trade led to declines for the period overall. Sentiment towards UK equities was poor as the FTSE All-Share fell 6.9%. Overseas buyers shunned the market amid ongoing political uncertainty and a weak outlook for economic growth.

After a strong start to the year, Japanese equities followed a similar pattern to other global markets and ended the quarter 4.7% lower. The heightened uncertainty resulted in a stronger yen against major currencies. Corporate results to December 2017 showed very positive trends.

Emerging markets equities registered a positive return in the first quarter, despite a rise in market volatility stemming from tensions over global trade. The MSCI Emerging Markets Index recorded a positive return and outperformed the MSCI World and although Chinese equities were volatile towards the end of the quarter, given rising trade tensions with the US, the market recorded a positive return and outperformed.

Australia was dragged down by its heavyweight banking sector as the potential impact of the Banking Royal Commission began to weigh. In sectoral terms, the other big losers on the Australian market were telecommunications stocks, utilities, REITs and energy.

If you would like to understand how any of the recent global activity has impacted you or would like to understand how investing can support you to reach your goals, give the Schuh Group Wealth Managers a call.

With thanks to DFA Australia for charts.
This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor's objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.

This week's money in life series focuses on a topic that may bring up thoughts and feelings that we don't like discussing on a day to day basis. We don't like to think of dying but it is going to happen to all of us one day. So, when our time does come what is the legacy we are going to leave? We can look at a legacy in terms of 'something that is part of you, your history, that will remain once you have left this earth' and also in a material sense as 'the money or property that you leave behind when you die'.

Last week we spoke about the importance of how you spend your retirement and this in a way is going to contribute to the legacy of your history that you leave behind. Other things that will contribute to the legacy you leave will be how you made a contribution during your career, with family and friends and just in how you lived your life in general. Yes, this is a long topic for contemplation and maybe too in depth to cover off here. However, what we can look at – which is a touch easier – is the financial part of the legacy equation and the assets that you leave behind.

After you have spent a lifetime of work accruing your assets, you owe it to yourself to make sure that when they pass to the next generation you are doing it in a way that won't deplete all that hard work you have done and also to make sure that your assets go to the people that you want them to go to. Estate planning is an area that we feel is as important as any other aspect of our role here at Schuh Group.

We encourage all of our clients no matter what age to have current wills and enduring powers of attorney in place and we work with them to ensure that the contents of their will reflect what they wish to occur in the event of something happening. Outside of establishing your Will, the other area that we work with our clients on is how their Estate passes to the next generation. Depending on how your assets are structured there can be tax implications that can greatly reduce the overall value of the legacy that you leave behind. It is important to start looking at this pre-retirement so that you can put the best strategies in place to reduce any tax liability that may occur when your estate is distributed.

If you would like to discuss your current Will, Estate or any Retirement planning we are only an email or phone call away 07 5482 2855 .

Most of the information we are given about retirement is about our finances – will we have enough? What's the best investment strategy? What sized pension will we get? All of this is important, but it's only part of the real story. If you are nearing retirement or you are retired, you have been around long enough to realise that there's more to happiness than the size of your bank account. We realise that retirement, like most things in life, has both positives and negatives. These can be some of the best years of your life when you have the freedom to do what you want when you want and they can also be boring, frustrating and lonely.

Retirement is a big step for most of us. It may be a step taken after much thought and planning or an optimistic leap into the unknown. Given that the number of Australians transitioning into retirement will increase in coming years, it is important to understand about preparing for the transition, and what strategies are successful to ensure a good quality of life when you get there. While most of us plan pre-retirement, research findings also suggest that you should continue planning during retirement in order to promote your well-being and live a full and active life. Planning and reflection on what you want can help you work out whether you have the resources for a successful retirement. Even if you are already retired, continual planning can kick-start a conversation about setting new goals, trying new approaches or seeking help in particular areas that may have been overlooked. Here are our top tips for a terrific retirement:

1. Having a positive attitude towards your future

Your ability to 'roll with the punches' will dictate how you approach most areas of your future life. There are life changes that you can expect in retirement; both positive and challenging. In fact, sociologists have identified at least six separate "life transitions" that will affect most people as they move through their retirement life (which is why we say that retirement isn't one long life phase). Perhaps the greatest transition of all is the one that you see each time you look in a mirror and see yourself change. It is easy to forget that "getting older" is a physical issue, not a mental one. As Satchel Page once asked, "How old would you be…if you didn't know how old you are?"

2. A clear vision of the kind of life that you want.

When you think of the word 'retirement', what vision comes to mind? Is retirement a work issue for you, or maybe a financial and investment plan? Far too many pre-retirees make the mistake of thinking that the financial plan and the retirement plan are the same things. They think that the "life and living" part of retirement will take care of itself. This stage of your life deserves a more holistic look and plan than simply assuming that you are beginning a thirty-year-long weekend. What do you want your life to look like? What changes do you anticipate along the way? How will you get the most out of each and every day? Those are important questions as you contemplate your move into this next phase of your life.

3. A healthy approach to mental and physical ageing.

It is one thing to say that you want to be positive about the future. If that is true for you, then healthy ageing will be a major part of your retirement plans and lifestyle. While the ageing process is normal and affects us all in different ways, there are some things that we can all do to ensure that we "put time on our side" by looking after ourselves. Most people think that being healthy physically is the key to healthy ageing. In retirement, healthy mental ageing is just as important (and some would say even more so.) How much do you understand the basic principles of healthy physical and mental ageing? Are you doing something each and every day to nourish your need to use and expand your mind or to honour your body and do what you can to maintain your physical health?

4. A positive definition of 'Work'

Your work is the thing that you do to contribute your skills, experience, labour or knowledge to society in some way. It is also a way for you to "self-actualise" and create positive stress in your life. Even when you leave the traditional workplace, you will still have a need to share your workplace strengths and transferable skills. If you have a positive attitude towards the workplace, then the desire to have a retirement free from any kind of work becomes irrelevant. A wise person once said, "If you love what you do, you never have to work again!" By the way, work doesn't have to be full-time, it doesn't have to be something you don't like to do, and it doesn't even have to be for pay! Many retirees use volunteering as a way to replace the things that they miss most about their previous work.

5. Nurturing family and personal relationships

Our close personal relationships define us, give us a purpose for living our lives and encourage us to create life goals. We all have a basic need to share our lives, experiences and life journey with those closest to us. In retirement, our friendships and close relationships may offer us the validation that we may have received in the workplace. Those relationships give us the opportunity to "connect" on many levels with someone close and to share ourselves. Psychologists have identified our desire to share ourselves as a basic human need. This need is often satisfied in the activities that we enjoy with our spouse or partner, friends and family. Researchers have found that people in satisfying personal relationships have fewer illnesses and higher levels of good overall health. That's the clinical rationale. In real life terms, having people close to you who will share your life and be there for you will not only add to your overall life enjoyment but will also add years on to your life!

6. An active social network

As you get older, your social support network becomes increasingly important. You draw your social support network from a much broader social and friendship network. Successful retirees generally have robust social networks that provide them with friendship, fulfilling activities and life structure. As part of your retirement plan, you might want to think about the quality of the social network that you have today and your plans to build it. One of the lessons that we can learn about the ageing process is that our social networks begin to shrink–if we aren't continually adding to them. You can join clubs, meet new people and get out of the house to do new things. In retirement, you are going to want a lot of people who you can count on and it makes good sense to continue to seek out new opportunities to socialise.

7. A balanced approach to leisure

Leisure is a fundamental human need. We use it to recharge our batteries, to act as a diversion in our lives, to create excitement, anticipation or simply to rest and contemplate. Things change, however, when leisure becomes the central focus of our lives. Leisure, by its very nature, loses its lustre when it is the norm in our life rather than the diversion. For many retirees, the idea of leisure is associated with "not having to do anything". In the end, a lack of stimulation affects our mental and emotional state and then ultimately our physical well being. There is a big difference between "time-filling" activities and "fulfilling" activities that we look forward to. In retirement, leisure activities often replace workplace functions to meet the basic needs that we have. Successful retirees balance their leisure over many different activities and take the opportunity to do new things and not get into a rut.

8. Maintaining 'financial comfort'

Some retirees feel that a happy retirement is guaranteed by financial security. However, there is no price tag on successful retirement. As someone once said, "having a million dollars is NOT a retirement plan!" Financial comfort refers to being able to manage your life in a satisfying and fulfilling way using the financial resources that you have. If financial discomfort contributes to retirement stress, then your financial plan becomes a negative rather than a positive. The keys to achieving financial comfort are to have a clear understanding of the financial resources you have and the demands on your money that will come from the life you lead (both now and in the future). One good way to look at your financial situation in this next life phase is to think about the three "buckets" that you will have to keep filled in order to achieve financial comfort:

  • Your "essentials" bucket, which will pay for all of your basic needs
  • Your "lifestyle" bucket, which will fund those fun things that you dream of doing in retirement
  • Your "nest egg" bucket, which will fund any emergencies that may arise, provide you with a sense of security through good and challenging times and ultimately will form part of your legacy

  • A wise person once said "While there are lots of books available on retirement, the only book that really matters is the one that you write yourself!"

How to Help Your Kids Get Out on Their Own

A lot has changed since the baby boomers and older Gen X'ers were their children's age. Generally, back in their "younger years", they would not have found themselves living at home with Mum and Dad into their late 20's and possibly their early 30's. This trend to "stay home as long as possible" which is increasingly prevalent with many Gen Y'ers & Z'ers either choosing to stay at home or having to stay at home because of costs. Statistics cite that nearly 25 per cent of people aged 20 to 34 continues to live in the parental home in 2018 and that the trend is only going to increase.

So How Can You Help?

Well for many Gen X'ers and baby boomers with kids still at home (that maybe should have moved on a few years ago), it is really about helping your kids to "fly the coup" while also protecting them at the same time. So, let's look at some of the main reasons as to why children haven't left home and some tips on how you can best help them out of the nest and into their own place.

 Housing Affordability:
One of the biggest causes of "kids staying longer" is housing affordability – both renting or saving for a house deposit seem to be harder each year. We have seen property prices and rents escalate dramatically in some areas without the growth in wages to match. With this in mind, your goal needs to be to teach your children good savings habits from as young as possible. Living at home can create a sense in your children that they have a large disposable income, so money may be spent on non-essentials and entertainment. This is then a habit that continues through later life. Start by helping them create a budget with a savings plan included and support them to understand how to prioritise their spending and forgo (sacrifice) those items that are not necessary. It will be important for them to know that the accumulative effect that their daily coffee or weekend outing costs. If they're working, encourage them to save at least 20% of their weekly income into an account they can't easily touch.

University Fees and Living Costs:
University fees and the cost of living whilst at Uni is also another reason why children are staying in the nest longer. Hopefully, if you do have an adult child living at home they are doing a little bit of work to help supplement their living expenses. If they aren't it may be wise to give them a push in that direction. As much as it may pain you to talk about it, now is a good time to start educating your children on personal finances. We suggest that you talk to them about the monthly expenses you are paying on their behalf and the student loan that they are accruing. Talk to them about reducing any debt they've accumulated and discussed interest rates with them, pointing out they should be paying off the highest interest debts first. Whilst they may not want to pay much attention at this time in their lives, the goal is that when they finish university they will find a job and be faced with managing their own finances so by ensuring they are in the know you are going to help give them a flying start when they're off on their own.

Job Security:
Lastly, job security also plays a strong role in why kids are staying longer. From not being able to find a job after university to becoming unemployed through restructuring or redundancy, loss of income is not just an emotional time for those involved it also creates socio-economic limitations. The important key to helping your kids if they are out of work and struggling is to remind them that periods of unemployment happen, but they need to "bounce" quickly and get back out there. And be sure to not sacrifice too much yourself. You are also at a stage in life where you should be creating wealth for retirement, meaning your support for them must be balanced with your own goals at this time. If they are making a little money, ask them to pay some rent and then agree on some responsibilities such as cooking dinner, cleaning and washing that they can do to help out. You are not a hotel, and the responsibility will also help them to stay on track and get back to work faster. Give them a timeframe on how long they can stay back at home, make this realistic but not too long. We have all had dreams of becoming rock stars or the next Warren Buffet but sometimes career expectations need to be managed. Giving your kids a timeframe on how long they can stay will put boundaries in place and give them an understanding of what is needed right now. With work, it is generally easier to get a new job when you already have one.

Across all circumstances, it is important to share the responsibility of living with your children – financially, emotionally and practically. Be transparent and honest with them and support them to understand money so that they can make better decisions.

We hope you have found some useful tips in this week's "Money in Life" series. Remember we are only an email or phone call away if you would like to seek advice on how to help plan your family's wealth now and into the future.




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