Happy New Year 2022. A lot of people make new years resolutions about getting financially organised and find the conviction on New Years eve loses impetus early in January. Why is this so ? Is this something that you notice in your own situation ?

The problem is, going from where you are now to where you want to be will not happen over night. You need to make resolutions and take actions that you can see work early. You need to see reward for the actions you take.

This will make you feel better and you get confidence that you are on the correct path. As you see progress will get motivation. Reward for effort is always a strong motivator.

A lot of resolutions revolve around the generic resolution of getting my finances in order however what does that mean ? It means different things to everyone reading this as we are all different. So what is the circumstance that is worrying YOU. You are the key. What does getting financially organised mean to you ? Common goals are pay off the credit card debts, paydown the mortgage, get rid of my consumer debts, What about After Pay and Buy Now Pay Later facilities.

Some people think of boosting their super however more people think of getting their super organised in one place. Other people want to have emergency savings. Education Funding is another concern a lot of people have and just having an emergency stash of money is what drives other people.

Financial Security – Important First Steps

Do i spend more than i earn ?

This is simplistic however simple works. If you earn $100 per week you can not reduce your debts or get financially organised until you KNOW that you spend less than $100 per week. Change that $100 figure for what you actually earn.

Understanding your cashflow is the first step to financial security. Spending less than you earn is the one and only guaranteed key financial security. That is as hard as it gets to be financially secure. Using the numbers above earn $100 spend $110 then at the end of the first week you have $10 outstanding on a credit card or payday loan.

This is not a big deal until you do it for 10 weeks. At that time you will have a weeks pay outstanding on a credit card or payday loan. The credit card is then on 20% interest so your spending over time will increase as you are no longer spending just the $110 on items, you now need to add interest to your weekly spend and you have to make repayments as well. Your cost of living has gone up or you constrain your lifestyle. No body wants to constrain thier lifestyle so this is when people get the second credit card and you are on the road to Doom.

If on the other had you earn $100, spend $90 then in 10 weeks you have a weeks wages $100 in your emergency fund. That is how you get money to spend or invest.

You can see in a matter of 10 weeks using simple numbers that the strategy of spending less than you earn is the key. You need to spend time on your cashflow, understand exactly what your earn and where it all goes. This allows you to make good decisions as to what you buy and why.

Emergency savings

After working on your cashflow the next most important thing you can do to organise your financial affairs is to get an emergency pool of money. Try to get your savings to $500 as first priority. When you get to $500 and think about the cost of a tyre, a fridge, a power bill you will realise that $500 is not enough. You should try and boost those savings to $1000 then $2000.

What this does is that next time you need to buy a loaf of bread or carton of milk you can use your money and not credit. You are breaking the cycle. If you get your Council rates bill then pay it quarterly and you are still not using your credit card you are using your money.

Your $1000 will drop to close to $500 however try not to get it below $500 by not spending money. The key to financial security is that you feel confident that you can meet your obligations and that comes from having money in the bank. Whilst money in the bank doesnt earn much it buys you peace of mind. You are in control and the next power bill is not going to be a crisis.

As your savings grow you will have confidence in your next months cashflow. This is when you will have the confidende to make decisions about new investments or bonus sustainable loan repayments.

Whatever your goal is you need a clear plan of what you are trying to achieve and a realistic time frame of when you will be able to achieve it.

I will work through a couple of strategies for common issues,

Credit Cards

If you have $5000 outstanding on a credit card and it has been stuck at that level for 6 months or longer you are not going to be able to pay it off immediately otherwise you would have already done that. What is a good plan?

The usual advice is to use every spare dollar to pay into the cards as the interest rate is very high. On the surface that appears to be a sensible plan however it does not allow you to make sustainable progress.

If you use all your money for credit card payments then when next you need petrol, bread,other basic items, pay your power bill then how do you pay? The only choice is the credit card so your cycle does not stop.
How do i break the credit card cycle

The best choice is to try to build savings in the bank as per the emergency savings mentioned previously. Depending on your earnings you may try to save $500 and try to have that as you base level. What you want to do is stop using the card and you can only do that if you have savings in the bank. So rather than paying everything into the credit card pay the minimum whilst you boost your savings in the bank. When your savings are at the $500 level then work towards $1000 in the bank. Start to use your savings for all of your day to day requirements and stop using your credit card and keep meeting your minimum repayments.

After a month or so when you have some more confidence, you know what bills you have in front of you then you can take your money in the bank from $1000 back to $500 by making a bonus payment into your credit card debt. Your minimum payments, plus some bonus payments on top of not using the card will see the debt start to come down sustainably.

You will have a plan, you will be in control and your will be making good progress based on realistic expectations of how the debt will be repaid. The key point is that you cannot keep using the credit card and hope to pay it off at the same time. You have to do something different to break the cycle. It will not be a quick process however it will be quicker than you think when you stop using the card and you do make repayments whilst living your life.

When you understand your cashflow and have emergency savings you can take control.

Buy Now Pay Later

These arrangements are similar to the credit card although whilst they dont charge interest they charge a fee if you miss a payment. If you dont have an emergency balance in your bank account and you miss a payment then a fee will be charged. If it is a $10 fee on a missed payment of $50 on a $300 purchase then that is similar to an interest payment. There is no free lunch someone will make money somehow.

BNPL works well if you have your emergency account. You will have your goods now, pay later and no fees. That all makes good sense.

Credit cards are similar where most of the cards will give you interest free days and if you pay the debt in full on the scheduled date then no interest. The issue is that credit providers of all types know that we are human and we will spend now more than what we earn and they will make money out of us because of it.

The key is to know your cashflow, have a surplus and then boost your savings in the bank. You can then use your cash in the bank for day to day requirements and then if you wish you can use a credit card or BNPL service benefits that yo will get knowing you will make the repayments when due and pay no interest.

What is the value of advice and using an adviser? Is it higher investment returns, paying less tax, higher Centrelink benefits, low cost investments ? Perhaps it is a smooth transition when your partner dies?

Is it knowing that you are always comfortable no matter what happens ?

This is an exchange yesterday with one client whose partner recently died. We have been working togther to finalise the estate. Roma became a client in 2008, her partner Alan in 2011 and Alan died at the end of 2020. In the modern vernacular they are a blended family, each with children of their own before they met.

This is a text message exchange i had after our meeting.


Thank you for making me feel so safe and secure. Alan trusted so few people but was so right with you. No I haven’t opened the bottle I just know how lucky I am . Also you and Joni never make me feel inadequate ( even if you feel it)xx Roma

Thanks Roma i appreciate your feedback. Joni and I certainly have always enjoyed dealing with you and Alan. As we discussed yesterday my job is very rewarding where we can assist people use their resources and the laws to put themselves in a far better position. Your life is so much better because you feel secure even when you are doing whatever you want. Enjoy cheers Andrew

In a nutshell!(Roma)

Roma and Alan never asked about what their investments are earning or what they cost. That was my job to make sure their portfolio was doing what was required in a cost effective manner. The specific details were covered in every advice document so they had all the information.

When the Pandemic hit Roma and Alan were busy with cancer treatment. They knew their money was safe. We worked with Alan to allow him to share his estate with his son and Roma’s children before he died so he could see the joy in their faces.

Roma said the day that Alan and his son were crying together was one of the better days of her life. Alan’s son thought his dad was making contact to ask him to assist with the funeral costs which he was happy to do. He got such a shock when his Dad giving him a big deposit so he could buy his first house with his wife and children.

The bottle reference is a result of me doing my small bit for the WA wine industry. Hayshed Hill had wine destined for overseas where the orders were cancelled so Hayshed Hill were discounting the wines to clear them. I purchased 3 dozen bottles with the idea of giving them to clients that come into the office for meetings and Roma came to our Canning Vale office.

It is never to early to start planning to live your perfect life which sometimes includes arranging things for really good outcomes at the end of life for all your family.

During Financial Planning Week it was good to hear from the FPA Chief Executive Dante De Gori on ABC news breakfast about the impact Covid has had on the reliability of peoples income during the pandemic. This impact has been important to their savings plans and goals and in 50% of people has had a significant impact.

The interview included references to the amount of information that is available to consumers everywhere however there is a lot of difference between information and how that information should apply to your circumstances and that is where a financial planner can assist you on your journey.

What is your plan ? It is never too early to start planning. If you would like to speak with an adviser then contact our office and we be happy to assist.

FPA CEO Dante De Gori CFP interview on ABC News Breakfast – YouTube

Financial Planning is a relatively new profession so there is a degree of nervousness amongst consumers about what the process is and how they will benefit. Why does anyone even need to see a financial planner ?

This week is Financial Planning week. The intention of Financial Planning week is to raise awareness amongst consumers about financial planning and how it works.

The laws in Australia relating to superannuation, savings, Centrelink and income tax are complex to put it nicely. Successive governments from both sides have been making their presence felt for many years to make things simpler. When the government is trying to make thing simpler you would not be surprised if the opposite happens.

There has been a huge amount of change in Financial Planning as the government tries to create an environment where you, the consumer is happy, comfortable and benefits from seeing a financial planner.

The government wants people to use financial planners and the government wants to know that you will be well looked after when you see a planner and you will derive significant benefit. I cannot argue with any of those sentiments. The government also wants you to know exactly what you are paying advisers and why and there is no argument from me on that front either.

The following is an article from the FPA’s Money and Life Websit about how financial planning works. I hope you enjoy the article and if you think that you may want to have a financial plan prepared then please seek out your local financial planner and if you are somewhere near Balcatta or Canning Vale then please contact our office.

https://www.moneyandlife.com.au/financial-planning/how-financial-planning-works

It is Financial Planning Week and the purpose of Financial Planning Week is to create awareness in the community about how consumers benefit from meeting with a Financial Planner. As far as we are concerned Improving your Lifestyle is our business and we do that by assisting you in preparing your financial plan to achieve the outcomes that you are looking to achieve.

We have included below a link to the FPA’s Money and Life Website and the article Why should I see a Financial Planner?

It is never too early to start planning. This is a great article from the FPA’s Money and Life Website for you to read and consider what you would like to do. I hope you enjoy the linked article and if you think that you may benefit from meeting with a financial planner then contact us and we will be happy to assist.

Money and Life | Why should I see a financial planner?

Are you confident your portfolio will produce the outcomes you want long term?

How are you invested?

Do you have My Super ? Do you think your My Super Super account is invested with your thoughts and dreams in mind? When did you discuss with your superannuation fund how you wanted your My Super portfolio invested?

What are you trying to achieve?

We spend a lot of time with clients explaining why their portfolio will produce the outcomes they want in all investment markets. People say you cannot predict things like Covid 19, the GFC or World Trade Centre disaster. That is true however whatever the cause, Share market falls of 20-30% happen all the time and you can prepare for that.

You know it will happen, you dont know when, you dont know the trigger you just know it will happen. The longer it has been since a big fall the closer the next one is.

If you know there will be a heavy share market falls then the only relevant question is what happens to you when it happens? If you cannot answer that question now, you need to get the answer before it happens otherwise you could be jeopardizing your financial future.

You need confidence that your money will look after you in all economic environments. To have that confidence you need to be engaged in how your portfolio is set up. That is what your financial planner can assist you with. Ensuring you have the cashflow to maintain your lifestyle long term is what your adviser is working with you to achieve and reliable investment returns are part of that process.

Active or Passive Managers
There is a lot of debate about Active Managers and Passive Managers and what is better. For the record we use Active and Passive mangers to achieve the clients objectives. What rate of return are you happy with ? That comes from Asset Allocation. How volatile do you want your portfolio ? That also comes from asset allocation. Do you want high return and high volatility or more steady return and stable asset values. That also is asset allocation. Some assets like cash earning 0.5% dont look that attractive when other assets are earning 20%+ pa. They look very attractive when shares are falling 20%. The key always is what is your exposure level. Eg what is your Asset Allocation

The cost of your portfolio comes from a combination of factors that can include passive managers, active managers. You could even hold a portfolio of shares yourself and dont pay any fee for that. It depends on what involvement you want and what other outcomes you are trying to achieve.

Interesting article

This article is from Perpetual who are an active manager who have people travelling the country and the world speaking with companies about what they are doing, how they see the prospects for their business against competitors. Perpetual use that research to work our how well a company is performing, is it expensive to buy at its current share price based on how we see its profits growing. They then have to decide if they want to include that company in the portfolio compared to 100’s of others that they have researched. In the end they will only have between 50-70 companies in a portfolio and will review 200-400 companies to arrive at their preferred portfolio.

This is an article about the Australian Company Boral and the research Perpetual did before buying a share holding in Boral.

If you would like to have a discussion with us about your portfolio and what outcomes you are hoping to get we are a fee for service business and are happy to speak with new clients if you are looking to work with an adviser over the longer term.

BORAL CASE STUDY: BUILDING A POSITION IN CYCLICAL COMPANIES

I saw this short video from Vanguard The Power of Perspective that highlights the power and long term benefits of regular investing.

It is never too early to start planning your future and certainly never to early to plan your retirement. Watching this video will give you a lot of confidence that time is your friend so use it wisely. Your strategy will work if you put it in place.

If you are looking for a financial planner for any reason we are able to assist you. A lot of Financial Planners have retired recently so if you are looking for a new Financial Planner then give ONeil Financial Planning some consideration.

Enjoy the video and thank you to Vanguard for such a good tool.

https://www.youtube.com/watch?v=Lcl43GLiYbQ