Creating Real Wealth

A young redhead boy is apple picking with his family in an orchard in autumn. He is smiling and giving an apple to his mother.

Income Solutions mission is to create wealth for our clients.
Wealth is the absence of financial worry, an income you don’t outlive, and a meaningful legacy to those whom you love.

Income Solutions MISSION STATEMENT

If you are healthy…. You are wealthy! And while this is a great sentiment and for any of us who have been experiencing illness recently it will certainly resonate. However, today we know that it is not as simple as this, as in recently quoted studies our health and wellbeing can be, up to a point, directly linked to our income https://www.incomesolutions.com.au/creating-wealth-that-creates-wellbeing/

We need money for our essential needs, and to participate in a community we need access to resources to make this possible, hence the creation of wealth in financial terms is required to fully embrace life in all its stages.

As it is Income Solutions core ‘Mission’ to create wealth for our clients, it is worth exploring the actual concept of wealth and how it might differ to simply being rich or having access to a high Income. The creation of wealth is working towards a sustainable income, as opposed to being rich and having access to money. Robert Kiyosaki, the author of ‘Rich Dad Poor Dad’ has encapsulated this concept very succinctly in the following quote:

“The rich have lots of money, but wealthy don’t worry about money”

In our Mission Statement we make clear that we view wealth as being the ‘absence of financial worry’ and in the above statement by Kiyosaki he states that the ‘wealthy don’t worry about money’. Core to this is that fact that wealthy people work towards obtaining a long-term sustainable income, live within their means and save and invest money in income producing assets such as an investment portfolio.

Creating real wealth usually involves avoiding debt for discretionary spending and instead borrowing less than you can afford to buy income producing assets.

A formula for achieving an ‘income that you don’t outline’ is described in a video Titled ‘Your Tree’ presented by Income Solutions founding Adviser David Ramsay https://vimeo.com/460822636 Using the analogy of an apple tree to describe an asset, he explains that the income your asset produces, the ‘apples’ it grows that you have access to picking will serve you better than ‘lopping off a branch’, and thus decreasing the size of your principal asset. Having an asset that generates an income without eating away at the principal ‘the tree’ will ensure your asset stays in tack not only throughout your lifespan but also as an asset for future generations, thus creating a meaningful legacy for those you love.

At Income Solutions we believe achieving wealth is achieving peace of mind https://www.incomesolutions.com.au/avoid-shattering-financial-outcomes/ A mind free from financial worry provides real wealth for our clients as they can then focus on what they care about most.

Referenced for this article:

https://moneysmart.gov.au/grow-your-super/how-much-super-you-need

https://www.incomesolutions.com.au/family-tree-research-providing-lessons-of-the-past/

Create your own story in retirement


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Retirement means starting a new chapter of your life, one that gives you the freedom to create your own story, as you decide exactly how you want to spend your time. While retirement may not be part of your immediate plans, there are advantages to giving some thought as to what retirement looks like for you and how to best position yourself, well before you leave the workforce behind.

A time of profound change
Even setting aside the huge financial implications of leaving a regular salary behind, retiring from work represents one of the biggest life changes you can experience.

For most people, the freedom of being able to do whatever you want to do, whenever you want to do it, is pretty enticing. However, it is quite common to have mixed feelings about retiring, particularly as you get closer to retirement. What we do for a living often defines us to some extent and leaving your job can mean a struggle with how you perceive yourself as well as how others view you. Coupled with the desire for financial security in retirement and the need to make your retirement savings last the distance, you have a lot to be dealing with.

So, let’s look at the things you need to be thinking about sooner rather than later, from an emotional and practical perspective, to ensure your retirement is everything you want it to be.

Forge your own path
Don’t be tied to preconceptions of what retirement is all about. Retirement has evolved from making a grand departure from the workplace with the gift of a gold watch to a more flexible transition that may unfold over several years. Equally, if the idea of a clean break appeals to you then that’s okay too and you just need to plan accordingly.

The same applies for your timeframe for retirement. The idea that you ‘have’ to retire at a certain age is no longer relevant given advances in healthcare and longer lifespans. If work makes you happy and fulfilled, then it can make sense to delay your departure from the workforce.

Planning how to spend your time
It sounds obvious but you’ll have more time on your hands so it’s important to think about what you want to devote that time to. A study found that 97 per cent of retirees with a strong sense of purpose were generally happy and satisfied in retirement, compared with 76 per cent without that sense.i Think about what gives your life meaning and purpose and weave those elements into your plans.

If you are part of a couple, it’s critical to ensure that you are both on the same page about what retirement means to you. This calls for open and honest communication about what you both want and may also involve some degree of compromise as you work together to come up with a plan that meets both of your needs.

Practical considerations
There’s a myriad of practical considerations once you have started to plan how you’ll spend your time.

Here are a few things you may wish to consider:

Where do you want to live? Do you want to be close to a city or are you interested in living in a more coastal or rural area? Are you wanting to travel or live overseas for extended periods?

What infrastructure and health services might you need as you age? Are these services adequate and accessible in the area you are thinking of living in?

What hobbies and activities do you want to be involved in. Do you need to start developing networks for those activities in advance?

Who do you want to spend time with? If you have children and grandchildren, think about what role you’d like to play in their lives upon retirement.

The best laid plans…
Of course, with all this planning it’s also important to acknowledge that the best laid plans can go astray due to factors beyond your control. It’s important to keep an open mind and be adaptable. While redundancy or poor health can play havoc with retirement dreams, it’s still possible to make the best of what life throws at you.

And of course, Income Solutions is here to help you with the financial side of things to ensure that retirement is not only something to look forward to, but a wonderful chapter of your life once you start to live out your retirement dreams.

Referenced for this article:
https://www.inc.com/magazine/201804/kathy-kristof/happy-retirement-satisfaction-enjoy-life.html

Building a Lifestyle

The first step in planning for the lifestyle that you want to live is to build your capital base (the money and assets you own) to where it will not only fund your lifestyle in the short term but will generate enough ongoing revenue that your income will continue to build and be replaced, thus providing you with an income for many more years to come together with creating a foundation for intergenerational wealth.

In speaking to people about what is important to them many of their main priorities include.

~ Family
~ Travel
~ Home
~ Entertainment
~ Leisure

It is crucial to identify whatever it is that is important to you as this will assist you in answering the core vital questions, How Much? Where from? and When?

Whatever your answers to these questions maybe and whatever priorities you identify when answering these vital questions, remember you only get one shot at life and it is worth planning for!

For further details regarding planning for your Lifestyle click on the following video link to hear from Income Solutions Principal, David Ramsay:
https://www.youtube.com/watch?v=aRTS0u8L_w8

VITAL QUESTIONS TO A FINANCIALLY INDEPENDENT FUTURE

At Income Solutions we believe that there a three core questions that you need to answer in planning for a financially independent future.

The first of these questions is WHEN? When in your life and at what stage do you want the freedom to work because you want to and not because you must? Thus, allowing you to follow your passions and the opportunity of pursuing everyday what truly fulfils you.

The second of these questions is HOW MUCH? What is the income you will need to wake up each morning and live the life you envisage and provide you with the means to direct your focus and energy to what you care most about?

Lastly, the third of these questions is WHERE? Where is this income going to come from and how are you going to plan now for achieving this income stream into the future?

The above three questions are vital in planning your financial future, however if you are struggling to answer these questions don’t worry as over the coming eight weeks Income Solutions will be releasing a weekly series of short instructional videos to allow you to address clearly and in detail these fundamental financial questions.
Click on the following link to watch the first short video in this series titled: When?, How Much?, Where?
https://www.youtube.com/watch?v=P0TbiptGoZA

Stay tuned next week for video two titled : THE BEST INVESTMENT YOU WILL EVER MAKE

KEY CHANGES TO TAX AND SUPERANNUATION IN 2021

Given that for most of us superannuation provides a pathway to our financial future, providing us with a tax-free income stream for our retirement, it is worth noting key Tax and Superannuation legislation changes that will take place in 2021.

Superannuation Guarantee Increase:
There is a superannuation guarantee increase from 9.5% to 10% effect from 1 July 2021. This is part of a previously legislated increase to 12% by 2025. This superannuation guarantee contribution is what your employer by law is required to pay as part of their legal employment obligation. If you are an employee, there will be an increase in the amount being contributed to your superannuation account. If you are an employer, the increase will need to be factored into your 2021/22 budget.

Your Superannuation will follow you:
Your superannuation follows you from 1 July 2021, when an employee commences with an employer, the employer will pay superannuation benefits to the person’s existing fund (if they have one) or to their nominated fund. Default funds will only be used where a person has no existing super fund and does not choose a fund.
New enterprise agreements and workplace determinations will not be able to prevent employees from exercising a right to choose a superannuation fund. Restrictions in agreements and determinations entered into before 1 January will remain in force.

Minimum Pension Payment:
The 50% reduction in minimum pension payment for the 2020/21 financial year is scheduled to cease at the start of the new financial year on 1 July 2021. The SIS Regulations were amended so that the minimum payments from account based and market linked pensions were halved for the 2019/20 and 2020/21 financial years. Unless the Government decides to extend the reduction in minimums for 2021/22, the minimum payments will revert to their usual rates. Note: After the GFC, during which the minimums were reduced by 50% for three years, the minimum rates did not immediately revert to their usual levels but were set at 75% for a further two years.

The Low- and Middle-Income Tax Offset:
The Low- and Middle-Income Tax Offset (LMITO) will cease from 1 July 2021. LMITO is not included in PAYG withholding schedules. Instead, it is calculated by the ATO when the person’s tax return is submitted. This means the cashflow effect will be delayed for 12 months, such as through lower a tax refund, additional tax payable or adjustments to PAYG instalments.

The above points are just a few of the key changes to Tax and Superannuation legislation for 2021 and beyond, and for a more detailed and comprehensive analysis of recent legislative changes please contact your adviser who will be able to assist you by providing details on how these changes may affect you.

PLAN YOUR VILLAGE IN RETIREMENT TODAY

Over the last 30 years that Income Solutions has been working with our clients to provide them with a worry free income stream in retirement, it has never been more evident that planning for a life after you leave your job requires more than just financial planning, it requires you to be part of a village. 

Maybe your village will be a global village, where you connect with others on an international level either travelling to destinations or through online technology?   Or maybe your village will be a local village where you join others to make the community you live in a better place?   But why wait until retirement to expand upon your interests and passions?  Together we can learn the lessons that COVID19 has taught us, that in planning for retirement the world is ever changing and by connecting with others to create your own village now or joining an existing group of people who welcome you to their community, the foundations you are creating will allow you to continually review and refocus on what shape your retirement will take.   

It is never too early to begin the exciting process of planning, creating and implementing what your retirement community will look like.  Will you create a new and exciting online special interest group that at the moment does not exist?  If so, what skills will you need and what new technologies will you need to learn?   Will you travel to meet like minded people in countries to work on a global special interest you all share? If so, why not begin researching and understanding the culture and languages you will be exposed to?   Or will your village take the form of getting to know the people in your street and local community better?  If so, why not organise a one-off event or Christmas Street party that will allow you an opportunity to meet people and begin forming your local village that you can build upon in retirement?   

The possibilities are endless and are only limited by your preferences and yes, even time, as we often hear that some people have never been so busy since they have retired, so why wait to start planning your village?   

Benefits of Advice

Lee Nickelson is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

In the wake of the Royal Commission into Misconduct in the Banking, Superannuating and Financial Services Industry, it is important that we continue to focus on the benefits of receiving expert Financial Advice.

SunSuper commissioned CoreData to investigate the benefits of advice in their 2017 Value of Advice report which produced some interesting results. Overwhelmingly, those surveyed who receive financial advice are more ”well” in life.  They are better equipped to deal with unexpected expenses, more prepared for retirement and have more confidence in making financial decisions (1).

80% of those currently advised believe advice has given them more confidence in making financial decisions

Financial literacy is an important benefit and outcome of an advice relationship. Whilst we don’t expect clients to follow the movements of the NASDAQ, having an understanding of investment characteristics such as income versus capital values, the importance of asset allocation and investing for the long term gives clients greater confidence when making financial decisions.  This in turn brings a greater sense of financial security and less worrying about money.  After all, our definition of wealth is an absence of financial worry.

79% of those currently advised believe advice has given them more control over their financial position

Planning for the future is so important as it gives you confidence you can achieve your immediate and future financial goals.  Whether it is setting aside funds for a rainy day, increasing your savings, or contributing to a retirement plan, having an advice relationship allows you to map out your own path to financial freedom.

77% of those currently advised believe advice has helped them feel prepared for retirement

Many of us think that retirement is so far away that it doesn’t warrant planning now – this couldn’t be further from the truth.  Einstein’s 8th wonder of the world is compounding returns, earning interest on your interest, so paying attention to your retirement nest egg early, no matter how small, is well worth while.

67% of those currently advised feel advice has made them more equipped to handle sudden, one off costs

Through accountability, information and support, receiving financial advice can help people establish contingency plans, insurance and debt management strategies to deal with unexpected events and life’s twists and turns.

80% of those currently advised believe advice has given them more peace of mind.

Financial security is important for everyone, to know we are on the right track and not borrowing from our future to live the life we are currently.  A staggering statistic from the report is 39% of those unadvised felt they had enough money to pay for recreational activities compared to 79% who were advised.

Financial stress affects people’s lives in quantifiable ways.  It can affect your health, relationships at home, and both your productivity and attendance at work.  This is why we continue to believe in the value of financial advice; knowing that it improves lifestyle outcomes and overall wellbeing.

If you are interested in your own financial health check, please don’t hesitate to contact an Financial Adviser at Income Solutions.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.

Managing Family and Finances

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Everyone leads a busy life, but it’s important to take time out to think about your current finances and your financial future.

When you are planning or have a young family, there are a lot of important tasks that are on your mind. It is easy to let every day things like managing your finances fall to the wayside.

Paying the bills is quick and easy, but thinking about the big picture in 10, 20 or 30 years down the track can feel like a daunting task. Many people think retirement is so far away and that they have plenty of time before they need to start looking at planning for that phase of their lives. There is also the belief that it will just work itself out.

But you are reading this, so take the time now to think about your life in 30 years’ time.

You don’t want to regret not planning for your future.

By engaging an advisor, it forces you to take time out once or twice a year to chat about your goals and strategy and make adjustment where needed. This helps you to not only be aware but also re-evaluate what’s important to you and what your goals are year to year.

Research shows that by writing down your goals, you are more likely to plan and work towards achieving them.

By having a trusted financial advisor to look at your goals and create a tailored strategy, you will have to spend less time thinking about your financial future, and you will be in a much better position in the future.

At Income Solutions, we place a lot of time educating our clients on our investment philosophy so that they walk out of their meetings with complete understanding of what their strategy will be and how it will help them reach their financial goals.

It’s never too late to re-assess your financial position and change your strategy, and it’s never too early for your teenage children to start understanding their finances.

We run 4 events each month that will help you start making a plan, no matter what stage you are in for planning your finances:

Common Sense Investing

Common Sense Estate Planning

Kickstart: Your Financial Future

Pivot: Choose Your Financial Direction

We urge you to have a look at our website – www.incomesolutions.com.au/events or have a chat to one of our financial advisors to see which event would help you to achieve your goals, for you and your family.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way

Success: A Relative Term

How often have you been asked what you want to get out of life? How many times has the answer been something like ‘I want to be successful in…’

Let’s take the word success and break it down, shall we? The Oxford Dictionary defines success as an accomplishment of an aim or purpose¹. I Like the last 3 words in that definition; aim or purpose. In fact, I think we perceive the term success to mean something entirely different to the Oxford Dictionary definition, with is wrong and unfair. Too often we seem to measure our own success against somebody else’s. We forget the true way to be successful is to accomplish an aim or purpose. Our own aim or purpose, not somebody else’s.

Let’s look at a broad example. Take 2 Real Estate Agents. Agent A has sold 50 properties in the financial year at an average price of $500,000. Agent B has sold 25 at the same average price. Who would you deem more successful? At first thought, you could be forgiven for saying Agent A. However, we do not know what either agent’s aim or purpose was. If Agent A had aimed to sell 70 properties at $500,000 average, and Agent B had aimed to sell 20, which agent would be deemed more successful? One did not meet their aim, and one not only accomplished their aim, they managed to exceed it by 25%. I would say Agent B would have had a more successful year because they accomplished their own personal aim.

The clearest way to know whether you are successful is to have distinct KPI’s to meet. Your own KPI’s. If you aim to earn $100,000 in a year, this will be easily measured; you have cracked the tonne or you haven’t. If you don’t and your mate did, it is imperative not to consider that year unsuccessful because we do not know what your mates aim was. They may have earned $50,000 under budget. All we know is that your own KPI was not met, and rather than stew on it, the pragmatic approach is to put in place provisions to increase your chances of accomplishing your goal the next year.

Humans are notorious for comparing themselves against their peers. It is in our nature. A lot of us attempt to achieve certain goals that are not organic, and the main reason we want to achieve them is because ‘that is what we are meant to do’ or ‘so and so are doing it, why shouldn’t I?’

That is the first mistake.

Attempting to achieve something that is not organic, and you are not passionate about is setting yourself up for failure before you have even started. If you fail attempting to achieve something you are passionate about, you will have learned from the experience and will be better in the long run. Even the most widely ‘successful’ people in the world have failed along the way², most say they would not have achieved what they have without failing along the way. It keeps them grounded.

At Income Solutions, we regularly help our clients articulate what it is they truly want to accomplish. This forms part of your Purple Box; your goals. An individual’s own goals should be used as the main barometer to measure their success. Everybody is different. Everybody has different reasons. Most people want to retire financially secure, which again, has a different meaning for everybody. It is your personal goals that need to be drilled down upon and identified.

These accomplishments almost always deliver far greater satisfaction, and more often then not, will lead to the common goal of financial security.

Personally, I do not really care if I am the wealthiest person in my friendship group when I retire. I will not measure my success using this metric.

A good client of our has a great saying: “I do not want to be the wealthiest man in the nursing home, or the cemetery.’ He and his wife managed to retire at an age most would consider quite young, now they have a wonderful life accomplishing the retirement goals they are passionate about, not somebody else’s. Therefore, I would call them very successful.

I have numerous personal goals I would like to accomplish; living abroad, continued charity donation, living on a modest acreage, the list goes on and on and will be different for everybody. My main goal or aim I am striving to accomplish is being able to choose whether or not I need to go to work or not by the age of 55 – or earlier – and donate my time to a couple of charities I hold dear, as well as ticking off some international destinations. At this point, I will need a capital base invested soundly enough to provide me with a passive income stream that will support mine and my family’s lifestyle, without earning a paycheck.

We can help you with understanding what this capital base should look like at Income Solutions!

The income stream that I deem enough will be decided by me, and I will not compare this income stream to any one else’s when determining it. If I use the various personal goals I have as stepping stones to reach my ultimate goal, I will be comfortable enough to call myself relatively successful.

 

1. https://en.oxforddictionaries.com/definition/success
2. https://www.entrepreneur.com/article/295312

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.

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