Financial Planning

In your 20's, consider the following points:
  
Typical profile:

  •     Non-homeowner
  •     No life or income protection insurance
  •     Job & career established
  •     Little superannuation accumulated as yet
  •     Live day to day with no forward planning
  
 
Depending on financial circumstance, risk profile and income, consider and take professional advice on the following:
  
Saving for Home or investment property deposit
Regular contribution to savings plan, direct shares or managed funds, margin loan with aim to accumulate deposit on own home or investment property.

Life and income protection insurance
Your income must be protected as your largest asset is your ability to earn. Establish income protection insurance while you are healthy and consider level premiums. Consider life insurance if you will leave someone else with debt upon death.

Accumulating Superannuation
Due to the power of compounding, a small amount of extra contribution to Super can make an enormous difference. Men need to contribute an extra 3% and women an extra 5% to super to result in a pension of 65% of their income at retirement time. For super contributions you will pay 15% tax on that money rather than your marginal tax rate which could be much higher.
Establish a Super Fund that provides you with access to a large choice of managed funds and direct shares allowing you to have significant control over investment choices. Super choice allows you to have your employer contribute to your own super.

Living day to day with no forward planning
Talk to a financial adviser and work with one over your working life. Establish an initial set of goals and objectives and treat this plan as a business plan that evolves over time as your circumstances and life stages change.

image-170352-bench.jpg?1416794722641
In your 30's, consider the following points:
  
Typical profile:
  
  •     Home mortgage
  •     May have an investment property or small value portfolio
  •     Have young family
  •     Partner part time or not working
  •     Little or no life and income protection insurance
  •     Career established
  •     Little or no savings
   
  
Depending on financial circumstance, risk profile and income, consider and take professional advice on the following:
  
Home mortgage
Mortgage reduction strategies exist to reduce the life of the debt but should not be seen in isolation to leveraging the equity you have built in your home. Equity can be released for investment purposes, the interest on this portion of your mortgage is tax deductible.
Reduction of non deductible debt such as home mortgage should always be a priority.
 
Investment Wealth accumulation
Depending on cash flow and your risk profile, consider long term investment in a managed fund or direct share portfolio using regular contributions. If income allows, use combination of regular contribution and margin loan to leverage the investment. If investment property is more attractive to you than shares, research areas that provide good a good rental pool i.e. near schools, transport, shopping and facilities.
  
Protect your income
People insure their cars, contents and homes, you need to insure your income as it will impact you and your family if you lose it due to illness or accident. If your work Superannuation offers income protection lasting 2 years, consider an additional policy where the benefit starts after 2 years, the premiums will be lower and the benefit can last to age 65.
 
Don't leave your family with debt and no assets
Life insurance is not expensive and can be used to pay off debt and provide an income for your family.
In your 40's, consider the following points
  
Typical profile:

  •     Home mortgage manageable, have built up some equity 
  •     Job or career well established
  •     Partner working
  •     Costs of family high
  •     Have life and income protection insurance
  •     Have an investment property or share portfolio
  •     Able to, but not contributing additional to superannuation
  •     Have some spare cash flow monthly
   
  
Depending on financial circumstance, risk profile and income, consider and take professional advice on the following:
  
Investments
Release home equity for investment in share or managed funds portfolio and set up regular savings contribution.

Review property investments
Review current property investment and decide if it suits your long term needs. If you have no property investment, research areas in City metropolitan areas for minimal maintenance, good yield property.

Superannuation
Start salary sacrificing an extra 5% of your salary to Super but be aware of the government imposed limits each year.

Insurances
Your Life, trauma and income protection policies should be reviewed every three years to ensure they provide up to date benefits and also competitive premiums. Insurance benefit offerings change regularly and premiums can be significantly lower than the policies you currently hold. If you do not have personal insurance, do it now before health issues exclude you or the loadings become excessive.

In your 50's, consider the following points

Typical profile:
  
  •     Mortgage paid off or very manageable, sizable equity built up
  •     An investment property or minimal portfolio
  •     Concerned about health
  •     Old insurances
  •     Children self funding
  •     Able to contribute additional funds to superannuation
  •     Concerned about having insufficient funds to retire
   
  
Depending on financial circumstance, risk profile and income, consider and take professional advice on the following:

Mortgage
Strive to pay down the mortgage to low level, no need to pay it off if equity can be used to leverage other investments.

Investments
Review all assets and create simple 10 year set of goals. Investment growth does not stop when you retire and investment assets should be inside your Super environment by the time you retire to gain maximum tax benefits. Remember, your super investments may need to last 30 years after you retire.

Insurances
You may have held insurances for 20 or more years, these need to be reviewed for benefits and premium levels as it is unlikely you will be changing them when you reach your late 50's. If you are in good health there is no reason not to consider changing them if you can get additional cover for the same outlay or better terms and benefits or even lower premiums. If you have no personal insurances and you are in good health, do it now. Income protection insurance ceases at age 65 except for some professions, if you fall ill, it may take some time to recover or you may never be well enough to return to work.

Transition to retirement
Not really! However this can be a good strategy if earning over $100,000 per year and you have a reasonable Superannuation balance. If you are over 55 you are able to set up a pension to draw from while salary sacrificing an additional amount to your Super. The end result can be the same net monthly income but with more contribution being made to your Super investment.

Super Contributions
If the only contributions to your Super have been made by your employer in the past, you need to be salary sacrificing an extra 15% into your Superannuation.

In your 60's, consider the following points:
 
Typical profile:
  
  •     Realise the need to continue working due to insufficient super and/or non-home assets
  •     Contributing as much as possible to Super
  •     Retire mid sixties
  •     Claim part pension
  
 
Most people currently reaching this Life Stage have not accumulated enough Superannuation to retire however they usually own their own home. If you have accumulated in excess of $1m in Super and own your home then congratulations, there is no reason why you cannot have a relatively comfortable retirement.

If not..
  
Depending on financial circumstance, risk profile and income, consider and take professional advice on the following:

If working and have Super balance
Implementing a transition to retirement strategy. Set up account based pension to draw down tax free income while salary sacrificing as much as possible to Super within the maximum limits. Contribute excess cash flow to superannuation up to maximum cap.

Adopt a no or minimal risk investment strategy
This is not the time to be taking investment risks if you are not earning enough to recover from bad decisions or unforeseen investment circumstances.

Review assets and investments
Prepare for retirement by ensuring maximum investment assets are inside your Super environment. All growth and income with an account based pension account is tax free - take advantage of it.

If you are retiring
Get professional advice and maximise government pension and concessions including Health Card. Your Super account needs to last as long as possible and you will likely need to set up a pension account that maximises income generation.