You don’t need an inner-city address, Caren will help you tackle money matters in the ‘burbs, through a better understanding of all the important issues – investing, superannuation, budgeting, tax, insurance, mortgages, gearing, shares, managed funds, small business, food, home, fashion, travel, and much more.

A fun and entertainingly educational forum, specifically designed for Australian “suburbanites".

Monday, June 16, 2014

Should you be managing your own super?

We recently held an education session on Self Managed Superannuation Funds (SMSF).  The feedback was terrific, and whilst I can't fit two hours worth of information into one blog, I can share a few of the salient points, and also extend an offer that we made on the night - not something we do very often.

A SMSF is quite simply a super fund that is set up by people who want to control their own retirement savings, and has less than 5 members.

What you find is that your standard super funds can be quite limiting in the types of investments that you can choose from.  So for people with reasonably high super balances that can be a real disadvantage, and you find that often those people will prefer the flexibility of a much greater range of investment opportunities, and having complete control over investment decisions.

The Australian Securities and Investment Commission will tell you that you probably need $200,000 - $250,000 to make it worthwhile, and that's because you need to justify the compliance or accounting costs that are involved.

It's important to point out that you still pay accounting and compliance costs in a retail or industry super fund, the difference is that they are often percentage based or a combination of fixed and percentage.  This means that people with small balances don't pay a lot for the accounting, but people with higher balances are actually often subsiding the costs for other people.

From the research we've done over the past few years, we'd agree that at $200-$250K it's definitely worth considering, especially if you're going to be making contributions for a while, but it becomes particularly cost effective for balances of $400,000 plus.  In many circumstances it will be a cheaper option than retail or industry super!

Oh and that doesn't mean $400,000 per member, but combined... Just bear in mind that members of a super fund must be family or in business together.

Perhaps the greatest SMSF misconception is that it is a lot of work for the members, but for the SMSF owner it doesn't need to be any more difficult than being in a standard super fund.  Make your Accountant and Financial Planner (ideally under one roof) do all the hard work!

Our accounting team has a specialisation in this area and we manage about 120 SMSFs and I can tell you right now that very few members want to have involvement in the compliance side of things like preparing the accounts and tax returns, updating trust deeds, writing minutes, arranging actuarial certificates...

When it comes to the rules, well they're pretty much the same as for any standard super fund - the difference is that you (and your Accountant) are responsible for making sure the fund meets it's obligations.

One rule that's changed relates to borrowing within a SMSF.  Previously no SMSF was permitted to borrow, but now you can - within some pretty tight rules.  If you're considering taking advantage of this opportunity you should definitely get advice.

And finally, within your SMSF you can invest in pretty much anything that constitutes a legitimate investment - shares, property, managed funds, artwork, coin collection, wine collection - as long as it meets all the legal guidelines of the "sole purpose" test which means it MUST be solely invested for your retirement.

Ok, so that's the "bare bones" summary.  At our education session we offered everyone who attended a free 45 minute session to chat about whether or not a SMSF would be worth considering.  We don't usually extend these offers to people who didn't attend, but in this case we're making an exception.  Do-it-yourself super is an area that's growing and growing fast (there's currently more than 500,000 funds in Australia!!) so we want to make sure you have all the facts to make an informed decision as to whether it might be a worthwhile strategy for your long-term financial security.

Click here for a copy of the offer - it expires June 30.

And if you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Money" radio segment on 98.1FM Radio Eastern.

Talk soon,

Wednesday, June 11, 2014

Think about it now, not later

I rarely recommend that certain books are a "must" because different people have different taste, and I wouldn't presume to think that just because I like it everyone else will.  But the E-Myth by Michael Gerber is different because it revolutionised the way people think about business.  In my book (ah c'mon, it's been awhile since I threw in a bad pun), it actually is a must for business owners.

The crux of Gerber's E-Myth theory is that very few people are "born" entrepreneurs, instead what he suggests happens is that we have an entrepreneurial seizure.  One day we decide we don't want to work for anyone and we just have to be our own boss.

Naturally, most people that go into business are really good at what they do - so a good technician - but not necessarily good at running a business.

So then it's up to us to develop entrepreneurial skills to GROW our business.  Gerber was the one who coined the phrase that you need to work "ON" your business, not just "IN" it.

Now to truly be an entrepreneur and grow your business, it's critical that you "begin with the end in mind", which is a concept invented by another business brain, Steven Covey.  He said, and I love this, "If your ladder is not leaning against the right wall, every step you take gets you to the wrong place faster."

When we start out in business we expect to be in it for the long-term right?  We have goals.  Some of them loftier than others.  One important goal that's often neglected is how we want it to end.

If you're planning a trip you need to know where you're going before you can plan the route yeah?

In order to achieve any goal you need to set it, visualise it, and plan for it.  This includes ultimately exiting your business.

As business owners we take significant risks on board, in anticipation that we'll be duly rewarded in the future.  For most of us, we expect the prize to come in retirement (with some lifestyle rewards along the way of course), but it doesn't just magically happen.  We plan for it.

Do you want to sell your business for a profit?  Are you hoping to cease the physical work, but remain a shareholder with a regular income?  Will you simply wind down the business?  Do you want a family member or staff member to succeed you?

Starting with the end in mind helps you build not only the type of business you want, but also the business you need to reach your ultimate goals.  And that's what it's all about - achieving goals you've set for yourself and your family.

One of the most important roles of a Business Adviser is to help their clients achieve those goals, and this means regularly measuring how you're tracking towards them.

Note you'll often hear me harping on about how important it is to review your business and I think most business-owners realise this and even agree with it (even if they don't always do it), but not a lot of business owners think about valuing their business to determine how they're tracking towards their goals.  In fact, most business owners don't consider doing this unless they're about to sell.

If you missed Michael Moschetti's article "Why value your business?" in our latest "4 Ways Bulletin" click here because it may give you some interesting food for thought.

If you'd like to hear more of what I have to say on the matter, click here for a recording of my most recent "You & Your Business" radio segment on 98.1FM Radio Eastern.

Talk soon,